1-800-FLOWERS.COM's (NASDAQ:FLWS) Returns On Capital Not Reflecting Well On The Business

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. Having said that, from a first glance at 1-800-FLOWERS.COM (NASDAQ:FLWS) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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. To calculate this metric for 1-800-FLOWERS.COM, this is the formula:

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

0.034 = US$29m ÷ (US$1.2b - US$342m) (Based on the trailing twelve months to December 2023).

So, 1-800-FLOWERS.COM has an ROCE of 3.4%. In absolute terms, that's a low return and it also under-performs the Specialty Retail industry average of 14%.

View our latest analysis for 1-800-FLOWERS.COM

Above you can see how the current ROCE for 1-800-FLOWERS.COM 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 1-800-FLOWERS.COM .

How Are Returns Trending?

When we looked at the ROCE trend at 1-800-FLOWERS.COM, we didn't gain much confidence. Over the last five years, returns on capital have decreased to 3.4% from 10% five years ago. Given the business is employing more capital while revenue has slipped, this is a bit concerning. If this were to continue, you might be looking at a company that is trying to reinvest for growth but is actually losing market share since sales haven't increased.

The Bottom Line

We're a bit apprehensive about 1-800-FLOWERS.COM because despite more capital being deployed in the business, returns on that capital and sales have both fallen. It should come as no surprise then that the stock has fallen 40% over the last five years, so it looks like investors are recognizing these changes. Unless there is a shift to a more positive trajectory in these metrics, we would look elsewhere.

1-800-FLOWERS.COM could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for FLWS on our platform quite valuable.

While 1-800-FLOWERS.COM 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.