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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. 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 the ROCE trend of Boot Barn Holdings (NYSE:BOOT) we really liked what we saw.
Understanding Return On Capital Employed (ROCE)
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Boot Barn Holdings:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.22 = US$231m ÷ (US$1.5b - US$445m) (Based on the trailing twelve months to December 2022).
Thus, Boot Barn Holdings has an ROCE of 22%. In absolute terms that's a great return and it's even better than the Specialty Retail industry average of 17%.
See our latest analysis for Boot Barn Holdings
Above you can see how the current ROCE for Boot Barn Holdings 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 Boot Barn Holdings.
So How Is Boot Barn Holdings' ROCE Trending?
We like the trends that we're seeing from Boot Barn Holdings. Over the last five years, returns on capital employed have risen substantially to 22%. Basically the business is earning more per dollar of capital invested and in addition to that, 153% more capital is being employed now too. So we're very much inspired by what we're seeing at Boot Barn Holdings thanks to its ability to profitably reinvest capital.
The Bottom Line On Boot Barn Holdings' ROCE
To sum it up, Boot Barn Holdings has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 382% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Boot Barn Holdings can keep these trends up, it could have a bright future ahead.
If you'd like to know about the risks facing Boot Barn Holdings, we've discovered 1 warning sign that you should be aware of.
If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.