Stock Analysis

Returns Are Gaining Momentum At Zebra Technologies (NASDAQ:ZBRA)

NasdaqGS:ZBRA
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If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Zebra Technologies' (NASDAQ:ZBRA) returns on capital, so let's have a look.

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. Analysts use this formula to calculate it for Zebra Technologies:

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

0.17 = US$908m ÷ (US$7.4b - US$2.1b) (Based on the trailing twelve months to October 2022).

Therefore, Zebra Technologies has an ROCE of 17%. On its own, that's a standard return, however it's much better than the 13% generated by the Electronic industry.

See our latest analysis for Zebra Technologies

roce
NasdaqGS:ZBRA Return on Capital Employed January 19th 2023

Above you can see how the current ROCE for Zebra Technologies compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Zebra Technologies here for free.

So How Is Zebra Technologies' ROCE Trending?

Zebra Technologies is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 17%. Basically the business is earning more per dollar of capital invested and in addition to that, 54% more capital is being employed now too. So we're very much inspired by what we're seeing at Zebra Technologies thanks to its ability to profitably reinvest capital.

Our Take On Zebra Technologies' ROCE

To sum it up, Zebra Technologies has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 140% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

Zebra Technologies does have some risks though, and we've spotted 3 warning signs for Zebra Technologies that you might be interested in.

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.

Valuation is complex, but we're helping make it simple.

Find out whether Zebra Technologies is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.