Cadre Holdings (NYSE:CDRE) Has More To Do To Multiply In Value Going Forward
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If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding 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 ran our eye over Cadre Holdings' (NYSE:CDRE) trend of ROCE, we liked what we saw.
Return On Capital Employed (ROCE): What Is It?
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. To calculate this metric for Cadre Holdings, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
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0.13 = US$75m ÷ (US$656m - US$94m) (Based on the trailing twelve months to March 2025).
Thus, Cadre Holdings has an ROCE of 13%. On its own, that's a standard return, however it's much better than the 11% generated by the Aerospace & Defense industry.
View our latest analysis for Cadre Holdings
Above you can see how the current ROCE for Cadre 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 analyst report for Cadre Holdings .
What The Trend Of ROCE Can Tell Us
While the current returns on capital are decent, they haven't changed much. The company has employed 136% more capital in the last five years, and the returns on that capital have remained stable at 13%. Since 13% 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 Cadre Holdings' ROCE
In the end, Cadre Holdings has proven its ability to adequately reinvest capital at good rates of return. However, over the last three years, the stock has only delivered a 22% return to shareholders who held over that period. That's why it could be worth your time looking into this stock further to discover if it has more traits of a multi-bagger.
On a final note, we've found 1 warning sign for Cadre Holdings that we think you should be aware of.