Clear Channel Outdoor Holdings (NYSE:CCO) Has More To Do To Multiply In Value Going Forward

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, 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. Having said that, from a first glance at Clear Channel Outdoor Holdings (NYSE:CCO) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Clear Channel Outdoor Holdings is:

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

0.064 = US$262m ÷ (US$5.2b - US$1.1b) (Based on the trailing twelve months to March 2022).

Thus, Clear Channel Outdoor Holdings has an ROCE of 6.4%. In absolute terms, that's a low return but it's around the Media industry average of 7.4%.

See our latest analysis for Clear Channel Outdoor Holdings

Above you can see how the current ROCE for Clear Channel Outdoor Holdings compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Clear Channel Outdoor Holdings.

What Can We Tell From Clear Channel Outdoor Holdings' ROCE Trend?

Things have been pretty stable at Clear Channel Outdoor Holdings, with its capital employed and returns on that capital staying somewhat the same for the last five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So don't be surprised if Clear Channel Outdoor Holdings doesn't end up being a multi-bagger in a few years time.

What We Can Learn From Clear Channel Outdoor Holdings' ROCE

In summary, Clear Channel Outdoor Holdings isn't compounding its earnings but is generating stable returns on the same amount of capital employed. And investors appear hesitant that the trends will pick up because the stock has fallen 57% in the last five years. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.

One final note, you should learn about the 3 warning signs we've spotted with Clear Channel Outdoor Holdings (including 1 which shouldn't be ignored) .

While Clear Channel Outdoor 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.