Returns At Container Store Group (NYSE:TCS) Are On The Way Up

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So when we looked at Container Store Group (NYSE:TCS) and its trend of ROCE, we really liked what we saw.

What is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on Container Store Group is:

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

0.16 = US$141m ÷ (US$1.1b - US$227m) (Based on the trailing twelve months to October 2021).

Thus, Container Store Group has an ROCE of 16%. In isolation, that's a pretty standard return but against the Specialty Retail industry average of 21%, it's not as good.

See our latest analysis for Container Store Group

Above you can see how the current ROCE for Container Store Group 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 report for Container Store Group.

What Does the ROCE Trend For Container Store Group Tell Us?

Investors would be pleased with what's happening at Container Store Group. Over the last five years, returns on capital employed have risen substantially to 16%. The amount of capital employed has increased too, by 38%. So we're very much inspired by what we're seeing at Container Store Group thanks to its ability to profitably reinvest capital.

The Key Takeaway

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 Container Store Group has. And with a respectable 51% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. Therefore, we think it would be worth your time to check if these trends are going to continue.

On a final note, we found 2 warning signs for Container Store Group (1 shouldn't be ignored) you should be aware of.

While Container Store Group 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.