Returns At Energizer Holdings (NYSE:ENR) Are On The Way Up

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. With that in mind, we've noticed some promising trends at Energizer Holdings (NYSE:ENR) so let's look a bit deeper.

What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Energizer Holdings is:

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

0.13 = US$454m ÷ (US$4.3b - US$668m) (Based on the trailing twelve months to March 2024).

Thus, Energizer Holdings has an ROCE of 13%. In isolation, that's a pretty standard return but against the Household Products industry average of 20%, it's not as good.

See our latest analysis for Energizer Holdings

In the above chart we have measured Energizer Holdings' prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Energizer Holdings .

So How Is Energizer Holdings' ROCE Trending?

Energizer Holdings has not disappointed in regards to ROCE growth. The figures show that over the last five years, returns on capital have grown by 67%. The company is now earning US$0.1 per dollar of capital employed. In regards to capital employed, Energizer Holdings appears to been achieving more with less, since the business is using 22% less capital to run its operation. If this trend continues, the business might be getting more efficient but it's shrinking in terms of total assets.

Our Take On Energizer Holdings' ROCE

From what we've seen above, Energizer Holdings has managed to increase it's returns on capital all the while reducing it's capital base. And given the stock has remained rather flat over the last five years, there might be an opportunity here if other metrics are strong. With that in mind, we believe the promising trends warrant this stock for further investigation.

If you want to know some of the risks facing Energizer Holdings we've found 4 warning signs (2 shouldn't be ignored!) that you should be aware of before investing here.

While Energizer Holdings 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.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com