Stock Analysis

Zebra Technologies (NASDAQ:ZBRA) Has More To Do To Multiply In Value Going Forward

NasdaqGS:ZBRA
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If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. So, when we ran our eye over Zebra Technologies' (NASDAQ:ZBRA) trend of ROCE, we liked what we saw.

Return On Capital Employed (ROCE): What Is It?

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 Zebra Technologies:

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

0.16 = US$922m ÷ (US$7.5b - US$1.8b) (Based on the trailing twelve months to July 2023).

So, Zebra Technologies has an ROCE of 16%. On its own, that's a standard return, however it's much better than the 13% generated by the Electronic industry.

View our latest analysis for Zebra Technologies

roce
NasdaqGS:ZBRA Return on Capital Employed October 31st 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 to see what analysts are forecasting going forward, you should check out our free report for Zebra Technologies.

So How Is Zebra Technologies' ROCE Trending?

While the returns on capital are good, they haven't moved much. Over the past five years, ROCE has remained relatively flat at around 16% and the business has deployed 74% more capital into its operations. Since 16% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

The Bottom Line On Zebra Technologies' ROCE

The main thing to remember is that Zebra Technologies has proven its ability to continually reinvest at respectable rates of return. However, over the last five years, the stock has only delivered a 25% return to shareholders who held over that period. So to determine if Zebra Technologies is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.

Zebra Technologies does have some risks though, and we've spotted 1 warning sign 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.