Clear Channel Outdoor Holdings (NYSE:CCO) Is Doing The Right Things To Multiply Its Share Price

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at Clear Channel Outdoor Holdings (NYSE:CCO) and its trend of ROCE, we really liked what we saw.

Return On Capital Employed (ROCE): What Is It?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the 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)

0.085 = US$330m ÷ (US$4.8b - US$965m) (Based on the trailing twelve months to June 2023).

Therefore, Clear Channel Outdoor Holdings has an ROCE of 8.5%. In absolute terms, that's a low return but it's around the Media industry average of 8.2%.

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 The Trend Of ROCE Can Tell Us

Clear Channel Outdoor Holdings has not disappointed with their ROCE growth. The figures show that over the last five years, ROCE has grown 53% whilst employing roughly the same amount of capital. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

In Conclusion...

In summary, we're delighted to see that Clear Channel Outdoor Holdings has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Given the stock has declined 68% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. With that in mind, we believe the promising trends warrant this stock for further investigation.

One more thing: We've identified 4 warning signs with Clear Channel Outdoor Holdings (at least 2 which shouldn't be ignored) , and understanding these would certainly be useful.

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.