The Return Trends At Clear Channel Outdoor Holdings (NYSE:CCO) Look Promising

There are a few key trends to look for if we want to identify the next multi-bagger. 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. Speaking of which, we noticed some great changes in Clear Channel Outdoor Holdings' (NYSE:CCO) returns on capital, so let's have a look.

Understanding Return On Capital Employed (ROCE)

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. Analysts use this formula to calculate it for Clear Channel Outdoor Holdings:

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

0.077 = US$285m ÷ (US$4.5b - US$833m) (Based on the trailing twelve months to June 2024).

Therefore, Clear Channel Outdoor Holdings has an ROCE of 7.7%. Ultimately, that's a low return and it under-performs the Media industry average of 9.8%.

Check out our latest analysis for Clear Channel Outdoor Holdings

In the above chart we have measured Clear Channel Outdoor Holdings' prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Clear Channel Outdoor Holdings .

What The Trend Of ROCE Can Tell Us

Clear Channel Outdoor Holdings has not disappointed in regards to ROCE growth. We found that the returns on capital employed over the last five years have risen by 44%. The company is now earning US$0.08 per dollar of capital employed. Interestingly, the business may be becoming more efficient because it's applying 30% less capital than it was five years ago. If this trend continues, the business might be getting more efficient but it's shrinking in terms of total assets.

The Bottom Line On Clear Channel Outdoor Holdings' ROCE

In the end, Clear Channel Outdoor Holdings has proven it's capital allocation skills are good with those higher returns from less amount of capital. Given the stock has declined 45% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. So researching this company further and determining whether or not these trends will continue seems justified.

If you'd like to know more about Clear Channel Outdoor Holdings, we've spotted 2 warning signs, and 1 of them is concerning.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.