There's Been No Shortage Of Growth Recently For Uber Technologies' (NYSE:UBER) Returns On Capital

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. 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)?

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 Uber Technologies:

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

0.065 = US$2.0b ÷ (US$42b - US$10b) (Based on the trailing twelve months to June 2024).

So, Uber Technologies has an ROCE of 6.5%. In absolute terms, that's a low return but it's around the Transportation industry average of 7.0%.

View our latest analysis for Uber Technologies

Above you can see how the current ROCE for Uber Technologies compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Uber Technologies .

What The Trend Of ROCE Can Tell Us

Uber Technologies has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses five years ago, but now it's earning 6.5% which is a sight for sore eyes. Not only that, but the company is utilizing 23% more capital than before, but that's to be expected from a company trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

Our Take On Uber Technologies' ROCE

To the delight of most shareholders, Uber Technologies has now broken into profitability. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you'd like to know about the risks facing Uber Technologies, we've discovered 3 warning signs that you should be aware of.

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.