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What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding 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 ran our eye over ICF International's (NASDAQ:ICFI) trend of ROCE, we 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. To calculate this metric for ICF International, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.10 = US$169m ÷ (US$2.1b - US$449m) (Based on the trailing twelve months to December 2024).
Therefore, ICF International has an ROCE of 10%. In absolute terms, that's a pretty standard return but compared to the Professional Services industry average it falls behind.
Check out our latest analysis for ICF International
Above you can see how the current ROCE for ICF International 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 ICF International .
The Trend Of ROCE
The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has consistently earned 10% for the last five years, and the capital employed within the business has risen 53% in that time. 10% is a pretty standard return, and it provides some comfort knowing that ICF International has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.
The Key Takeaway
In the end, ICF International has proven its ability to adequately reinvest capital at good rates of return. However, over the last five years, the stock has only delivered a 24% return to shareholders who held over that period. So to determine if ICF International is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.
One final note, you should learn about the 2 warning signs we've spotted with ICF International (including 1 which doesn't sit too well with us) .