Stock Analysis

We Like These Underlying Return On Capital Trends At Option Care Health (NASDAQ:OPCH)

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What trends should we look for it we want to identify stocks that can multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, Option Care Health (NASDAQ:OPCH) looks quite promising in regards to its trends of return on capital.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Option Care Health:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.094 = US$240m ÷ (US$3.1b - US$565m) (Based on the trailing twelve months to December 2022).

So, Option Care Health has an ROCE of 9.4%. Even though it's in line with the industry average of 9.4%, it's still a low return by itself.

Check out our latest analysis for Option Care Health

NasdaqGS:OPCH Return on Capital Employed March 17th 2023

Above you can see how the current ROCE for Option Care Health compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Option Care Health here for free.

What Can We Tell From Option Care Health's ROCE Trend?

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. Over the last five years, returns on capital employed have risen substantially to 9.4%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 112%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

Our Take On Option Care Health's ROCE

All in all, it's terrific to see that Option Care Health is reaping the rewards from prior investments and is growing its capital base. And a remarkable 320% total return over the last three years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Option Care Health can keep these trends up, it could have a bright future ahead.

On a final note, we've found 1 warning sign for Option Care Health that we think you should be aware of.

While Option Care Health may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

What are the risks and opportunities for Option Care Health?

Option Care Health, Inc. offers home and alternate site infusion services in the United States.

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  • Trading at 35.4% below our estimate of its fair value

  • Earnings are forecast to grow 14.99% per year

  • Earnings grew by 7.6% over the past year


  • Has a high level of debt

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