The Returns On Capital At America's Car-Mart (NASDAQ:CRMT) Don't Inspire Confidence

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Although, when we looked at America's Car-Mart (NASDAQ:CRMT), it didn't seem to tick all of these boxes.

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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 America's Car-Mart is:

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

0.057 = US$86m ÷ (US$1.6b - US$88m) (Based on the trailing twelve months to July 2025).

Thus, America's Car-Mart has an ROCE of 5.7%. Ultimately, that's a low return and it under-performs the Specialty Retail industry average of 14%.

Check out our latest analysis for America's Car-Mart

Above you can see how the current ROCE for America's Car-Mart 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 America's Car-Mart .

So How Is America's Car-Mart's ROCE Trending?

We weren't thrilled with the trend because America's Car-Mart's ROCE has reduced by 52% over the last five years, while the business employed 133% more capital. That being said, America's Car-Mart raised some capital prior to their latest results being released, so that could partly explain the increase in capital employed. America's Car-Mart probably hasn't received a full year of earnings yet from the new funds it raised, so these figures should be taken with a grain of salt.

The Key Takeaway

Bringing it all together, while we're somewhat encouraged by America's Car-Mart's reinvestment in its own business, we're aware that returns are shrinking. And investors may be expecting the fundamentals to get a lot worse because the stock has crashed 74% over the last five years. Therefore based on the analysis done in this article, we don't think America's Car-Mart has the makings of a multi-bagger.

If you want to continue researching America's Car-Mart, you might be interested to know about the 1 warning sign that our analysis has discovered.

While America's Car-Mart 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.