If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, 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, John Wiley & Sons (NYSE:WLY) 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. The formula for this calculation on John Wiley & Sons is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.12 = US$227m ÷ (US$2.7b - US$689m) (Based on the trailing twelve months to July 2024).
Thus, John Wiley & Sons has an ROCE of 12%. On its own, that's a standard return, however it's much better than the 9.4% generated by the Media industry.
Check out our latest analysis for John Wiley & Sons
In the above chart we have measured John Wiley & Sons' prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for John Wiley & Sons .
So How Is John Wiley & Sons' ROCE Trending?
John Wiley & Sons' ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 24% 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. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.
Our Take On John Wiley & Sons' ROCE
In summary, we're delighted to see that John Wiley & Sons has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Since the stock has only returned 29% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. So with that in mind, we think the stock deserves further research.
If you want to continue researching John Wiley & Sons, you might be interested to know about the 2 warning signs that our analysis has discovered.
While John Wiley & Sons 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.
About NYSE:WLY
Average dividend payer and slightly overvalued.
