We Like These Underlying Return On Capital Trends At Lands' End (NASDAQ:LE)

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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. Speaking of which, we noticed some great changes in Lands' End's (NASDAQ:LE) returns on capital, so let's have a look.

Our free stock report includes 2 warning signs investors should be aware of before investing in Lands' End. Read for free now.

What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Lands' End, this is the formula:

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

0.11 = US$60m ÷ (US$765m - US$228m) (Based on the trailing twelve months to January 2025).

So, Lands' End has an ROCE of 11%. That's a relatively normal return on capital, and it's around the 13% generated by the Specialty Retail industry.

See our latest analysis for Lands' End

Above you can see how the current ROCE for Lands' End 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 analyst report for Lands' End .

What The Trend Of ROCE Can Tell Us

Lands' End has not disappointed in regards to ROCE growth. We found that the returns on capital employed over the last five years have risen by 105%. That's not bad because this tells for every dollar invested (capital employed), the company is increasing the amount earned from that dollar. In regards to capital employed, Lands' End appears to been achieving more with less, since the business is using 35% less capital to run its operation. Lands' End may be selling some assets so it's worth investigating if the business has plans for future investments to increase returns further still.

The Bottom Line On Lands' End's ROCE

In summary, it's great to see that Lands' End has been able to turn things around and earn higher returns on lower amounts of capital. Considering the stock has delivered 19% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. So with that in mind, we think the stock deserves further research.

If you'd like to know more about Lands' End, we've spotted 2 warning signs, and 1 of them can't be ignored.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.