Returns On Capital Are Showing Encouraging Signs At Inghams Group (ASX:ING)

Yahoo

3 days ago

If you're looking for a multi-bagger, there's a few things to keep an eye out 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So on that note, Inghams Group (ASX:ING) looks quite promising in regards to its trends of return on capital.
Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.
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 Inghams Group is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.12 = AU$204m ÷ (AU$2.4b - AU$658m) (Based on the trailing twelve months to December 2024).
So, Inghams Group has an ROCE of 12%. In absolute terms, that's a satisfactory return, but compared to the Food industry average of 8.1% it's much better.
Check out our latest analysis for Inghams Group
Above you can see how the current ROCE for Inghams Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Inghams Group for free.
Inghams Group's ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 72% in that same time. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.
To bring it all together, Inghams Group has done well to increase the returns it's generating from its capital employed. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 33% to shareholders. So with that in mind, we think the stock deserves further research.
If you'd like to know more about Inghams Group, we've spotted 2 warning signs, and 1 of them is concerning.
For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.
—
Investing narratives with Fair Values
A case for TSXV:USA to reach USD $5.00 - $9.00 (CAD $7.30–$12.29) by 2029. By Agricola – Community Contributor
Fair Value Estimated: CA$12.29 · 0.9% Overvalued
DLocal's Future Growth Fueled by 35% Revenue and Profit Margin Boosts By WynnLevi – Community Contributor
Fair Value Estimated: $195.39 · 0.9% Overvalued
Historically Cheap, but the Margin of Safety Is Still Thin By Mandelman – Community Contributor
Fair Value Estimated: SEK232.58 · 0.1% Overvalued
View more featured narratives
—
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.