We Like These Underlying Trends At Hemisphere Media Group (NASDAQ:HMTV)

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. 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, we've noticed some promising trends at Hemisphere Media Group (NASDAQ:HMTV) so let's look a bit deeper.

Return On Capital Employed (ROCE): What is it?

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. Analysts use this formula to calculate it for Hemisphere Media Group:

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

0.085 = US$38m ÷ (US$493m - US$42m) (Based on the trailing twelve months to September 2020).

So, Hemisphere Media Group has an ROCE of 8.5%. On its own that's a low return on capital but it's in line with the industry's average returns of 9.4%.

Check out our latest analysis for Hemisphere Media Group

Above you can see how the current ROCE for Hemisphere Media Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

So How Is Hemisphere Media Group's ROCE Trending?

Hemisphere Media Group's ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 22% in that same time. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

The Key Takeaway

To bring it all together, Hemisphere Media Group has done well to increase the returns it's generating from its capital employed. And since the stock has fallen 24% over the last five years, there might be an opportunity here. With that in mind, we believe the promising trends warrant this stock for further investigation.

If you'd like to know more about Hemisphere Media Group, we've spotted 2 warning signs, and 1 of them is concerning.

While Hemisphere Media Group isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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