Returns At Alliant Energy (NASDAQ:LNT) Appear To Be Weighed Down

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. However, after investigating Alliant Energy (NASDAQ:LNT), we don't think it's current trends fit the mold of a multi-bagger.

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Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Alliant Energy is:

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

0.047 = US$930m ÷ (US$23b - US$2.7b) (Based on the trailing twelve months to December 2024).

Thus, Alliant Energy has an ROCE of 4.7%. On its own that's a low return on capital but it's in line with the industry's average returns of 5.0%.

View our latest analysis for Alliant Energy

Above you can see how the current ROCE for Alliant Energy 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 Alliant Energy .

What Does the ROCE Trend For Alliant Energy Tell Us?

The returns on capital haven't changed much for Alliant Energy in recent years. Over the past five years, ROCE has remained relatively flat at around 4.7% and the business has deployed 37% more capital into its operations. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

What We Can Learn From Alliant Energy's ROCE

In conclusion, Alliant Energy has been investing more capital into the business, but returns on that capital haven't increased. Since the stock has gained an impressive 51% over the last five years, investors must think there's better things to come. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 2 warning signs for Alliant Energy (of which 1 shouldn't be ignored!) that you should know about.

While Alliant Energy may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.