Tractor Supply's (NASDAQ:TSCO) Returns Have Hit A Wall

Yahoo

7 hours ago

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. That's why when we briefly looked at Tractor Supply's (NASDAQ:TSCO) ROCE trend, we were pretty happy with what we saw.
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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 Tractor Supply, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.19 = US$1.5b ÷ (US$10b - US$2.6b) (Based on the trailing twelve months to March 2025).
So, Tractor Supply has an ROCE of 19%. In absolute terms, that's a satisfactory return, but compared to the Specialty Retail industry average of 13% it's much better.
View our latest analysis for Tractor Supply
In the above chart we have measured Tractor Supply's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Tractor Supply .
The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has consistently earned 19% for the last five years, and the capital employed within the business has risen 73% in that time. 19% is a pretty standard return, and it provides some comfort knowing that Tractor Supply 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.
In the end, Tractor Supply has proven its ability to adequately reinvest capital at good rates of return. And the stock has done incredibly well with a 118% return over the last five years, so long term investors are no doubt ecstatic with that result. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.
Tractor Supply does have some risks though, and we've spotted 1 warning sign for Tractor Supply that you might be interested in.
If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.
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