Investors Shouldn't Overlook Buckle's (NYSE:BKE) Impressive Returns On Capital

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. With that in mind, the ROCE of Buckle (NYSE:BKE) looks great, so lets see what the trend can tell us.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Buckle:

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

0.48 = US$309m ÷ (US$849m - US$207m) (Based on the trailing twelve months to April 2023).

So, Buckle has an ROCE of 48%. In absolute terms that's a great return and it's even better than the Specialty Retail industry average of 14%.

Check out our latest analysis for Buckle

In the above chart we have measured Buckle's 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 report for Buckle.

SWOT Analysis for Buckle

So How Is Buckle's ROCE Trending?

The trends we've noticed at Buckle are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 48%. Basically the business is earning more per dollar of capital invested and in addition to that, 44% more capital is being employed now too. So we're very much inspired by what we're seeing at Buckle thanks to its ability to profitably reinvest capital.

In Conclusion...

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Buckle has. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you want to know some of the risks facing Buckle we've found 2 warning signs (1 doesn't sit too well with us!) that you should be aware of before investing here.

Buckle is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.