Returns At Uber Technologies (NYSE:UBER) Are On The Way Up

There are a few key trends to look for if we want to identify the next multi-bagger. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at Uber Technologies (NYSE:UBER) 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. To calculate this metric for Uber Technologies, this is the formula:

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

0.012 = US$316m ÷ (US$36b - US$9.4b) (Based on the trailing twelve months to September 2023).

So, Uber Technologies has an ROCE of 1.2%. In absolute terms, that's a low return and it also under-performs the Transportation industry average of 9.1%.

View our latest analysis for Uber Technologies

In the above chart we have measured Uber Technologies' prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Uber Technologies here for free.

What Can We Tell From Uber Technologies' ROCE Trend?

We're delighted to see that Uber Technologies is reaping rewards from its investments and is now generating some pre-tax profits. The company was generating losses five years ago, but now it's earning 1.2% which is a sight for sore eyes. In addition to that, Uber Technologies is employing 50% more capital than previously which is expected of a company that's trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

Our Take On Uber Technologies' ROCE

Long story short, we're delighted to see that Uber Technologies' reinvestment activities have paid off and the company is now profitable. Investors may not be impressed by the favorable underlying trends yet because over the last three years the stock has only returned 9.5% to shareholders. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

If you'd like to know more about Uber Technologies, we've spotted 4 warning signs, and 1 of them is concerning.

While Uber Technologies 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.