Shareholders Would Enjoy A Repeat Of Oil-Dri Corporation of America's (NYSE:ODC) Recent Growth In Returns

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, the ROCE of Oil-Dri Corporation of America (NYSE:ODC) looks great, so lets see what the trend can tell us.

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Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for Oil-Dri Corporation of America, this is the formula:

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

0.21 = US$66m ÷ (US$370m - US$58m) (Based on the trailing twelve months to April 2025).

So, Oil-Dri Corporation of America has an ROCE of 21%. In absolute terms that's a very respectable return and compared to the Household Products industry average of 23% it's pretty much on par.

View our latest analysis for Oil-Dri Corporation of America

Historical performance is a great place to start when researching a stock so above you can see the gauge for Oil-Dri Corporation of America's ROCE against it's prior returns. If you're interested in investigating Oil-Dri Corporation of America's past further, check out this free graph covering Oil-Dri Corporation of America's past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

The trends we've noticed at Oil-Dri Corporation of America are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 21%. 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 78%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

What We Can Learn From Oil-Dri Corporation of America's ROCE

To sum it up, Oil-Dri Corporation of America has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 292% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

On a separate note, we've found 1 warning sign for Oil-Dri Corporation of America you'll probably want to know about.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity.

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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.