Altice USA's (NYSE:ATUS) Returns Have Hit A Wall

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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. Having said that, from a first glance at Altice USA (NYSE:ATUS) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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. Analysts use this formula to calculate it for Altice USA:

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

0.061 = US$1.8b ÷ (US$32b - US$2.1b) (Based on the trailing twelve months to September 2024).

Therefore, Altice USA has an ROCE of 6.1%. Ultimately, that's a low return and it under-performs the Media industry average of 9.6%.

See our latest analysis for Altice USA

Above you can see how the current ROCE for Altice USA 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 analyst report for Altice USA .

What Can We Tell From Altice USA's ROCE Trend?

Things have been pretty stable at Altice USA, with its capital employed and returns on that capital staying somewhat the same for the last five years. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. With that in mind, unless investment picks up again in the future, we wouldn't expect Altice USA to be a multi-bagger going forward.

What We Can Learn From Altice USA's ROCE

We can conclude that in regards to Altice USA's returns on capital employed and the trends, there isn't much change to report on. Moreover, since the stock has crumbled 90% over the last five years, it appears investors are expecting the worst. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

Altice USA does have some risks, we noticed 3 warning signs (and 2 which are concerning) we think you should know about.

While Altice USA 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.