Returns At Liberty TripAdvisor Holdings (NASDAQ:LTRP.A) 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? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Liberty TripAdvisor Holdings (NASDAQ:LTRP.A) looks quite promising in regards to its trends of return on capital.

What Is 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. Analysts use this formula to calculate it for Liberty TripAdvisor Holdings:

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

0.021 = US$88m ÷ (US$4.6b - US$534m) (Based on the trailing twelve months to December 2022).

Therefore, Liberty TripAdvisor Holdings has an ROCE of 2.1%. In absolute terms, that's a low return and it also under-performs the Interactive Media and Services industry average of 7.3%.

Check out our latest analysis for Liberty TripAdvisor Holdings

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

SWOT Analysis for Liberty TripAdvisor Holdings

So How Is Liberty TripAdvisor Holdings' ROCE Trending?

While the ROCE isn't as high as some other companies out there, it's great to see it's on the up. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 1,727% in that same time. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

What We Can Learn From Liberty TripAdvisor Holdings' ROCE

To sum it up, Liberty TripAdvisor Holdings is collecting higher returns from the same amount of capital, and that's impressive. And since the stock has dived 92% over the last five years, there may be other factors affecting the company's prospects. Still, it's worth doing some further research to see if the trends will continue into the future.

If you'd like to know about the risks facing Liberty TripAdvisor Holdings, we've discovered 1 warning sign that you should be aware of.

While Liberty TripAdvisor Holdings 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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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.