Latest news with #ROIC
Yahoo
01-07-2025
- Business
- Yahoo
Insteel (IIIN): Buy, Sell, or Hold Post Q1 Earnings?
What a fantastic six months it's been for Insteel. Shares of the company have skyrocketed 41.9%, hitting $37.21. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move. Is there a buying opportunity in Insteel, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it's free. We're happy investors have made money, but we're swiping left on Insteel for now. Here are three reasons why we avoid IIIN and a stock we'd rather own. Examining a company's long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Insteel grew its sales at a tepid 4.8% compounded annual growth rate. This fell short of our benchmark for the industrials sector. While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business. Sadly for Insteel, its EPS declined by more than its revenue over the last two years, dropping 44.9%. This tells us the company struggled to adjust to shrinking demand. ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity). We like to invest in businesses with high returns, but the trend in a company's ROIC is what often surprises the market and moves the stock price. Over the last few years, Insteel's ROIC has unfortunately decreased significantly. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities. We see the value of companies helping their customers, but in the case of Insteel, we're out. After the recent rally, the stock trades at 19× forward P/E (or $37.21 per share). This valuation multiple is fair, but we don't have much confidence in the company. There are better investments elsewhere. We'd recommend looking at a top digital advertising platform riding the creator economy. Market indices reached historic highs following Donald Trump's presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth. While this has caused many investors to adopt a "fearful" wait-and-see approach, we're leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025). Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
28-06-2025
- Business
- Yahoo
Think Costco Wholesale Is Expensive? This Chart Might Change Your Mind.
Costco stock has delivered a 2,320% total return over the past 15 years. The company keeps growing its cash profits while earning increasingly strong returns on its business investments. Costco's ROIC even beats Amazon's in the asset-light e-commerce sector. 10 stocks we like better than Costco Wholesale › Warehouse retailer Costco Wholesale (NASDAQ: COST) may sell goods at affordable prices, but the stock is pretty expensive. Costco investors have pocketed a total return of 2,320% over the last 15 years, leaving the S&P 500 index far behind at a 663% gain. The stock traded at a luxurious 55.8 times trailing earnings on June 26, or 59.6 times free cash flow. So you wouldn't be the first investor to call Costco's stock "expensive." But you might change your mind when you look at the chart below. I'm about to show you a rare combination. Costco has a long-standing habit of growing its cash profits, while also making better and better use of the new capital over time. Free cash flow is the profit that's left over after paying off operating expenses and capital expenses. This capital can be used to finance dividend payouts, execute share buybacks, acquire smaller rivals, or boost the balance sheet's cash reserves. It's a measure of real cash profits, rather than the tax accounting construct you know as net profit or earnings. And Costco earns a lot of cash profits. Return on invested capital (ROIC) measures how effectively a company puts its profits to work. Costco's ROIC is nearly double the figures you see for Walmart (NYSE: WMT) or Target (NYSE: TGT) nowadays, and even exceeds Amazon's (NASDAQ: AMZN) ROIC in the asset-light e-commerce industry. The company also delivers consistently wider ROIC margins over time, while most retailers struggle to keep ROIC stable. As Costco pairs richer ROIC readings with growing cash flows, it keeps feeding a flywheel of constant business improvements. That's an incredibly shareholder-friendly combination. Before you buy stock in Costco Wholesale, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Costco Wholesale wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $713,547!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $966,931!* Now, it's worth noting Stock Advisor's total average return is 1,062% — a market-crushing outperformance compared to 177% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of June 23, 2025 John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Anders Bylund has positions in Amazon and Walmart. The Motley Fool has positions in and recommends Amazon, Costco Wholesale, Target, and Walmart. The Motley Fool has a disclosure policy. Think Costco Wholesale Is Expensive? This Chart Might Change Your Mind. was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Globe and Mail
18-06-2025
- Business
- Globe and Mail
Think Delta Air Lines Is Expensive? This Chart Might Change Your Mind.
Investors might not consider Delta Air Lines (NYSE: DAL) stock expensive due to its low price-to-earnings ratio of just over 8 times earnings. Still, some of them do stress over Delta's adjusted net debt of $16.9 billion and the traditional cyclicality of its revenue and earnings. That said, I think the risk is a lot less than in previous years. Here's why. Airline profitability One of the longstanding, and justified, criticisms of the airline industry is that it hasn't generated a return on invested capital (ROIC) sufficient to cover its weighted average cost of capital (WACC). While airlines will all have different WACCs, a rough estimate interpolated from International Air Transport Association (IATA) figures suggests it averages around 8% or 9%. The following chart illustrates a clear bifurcation in the industry over recent years, with Delta and United Airlines ' return on invested capital (ROIC) exceeding 8%, significantly ahead of American Airlines and the budget carriers. Moreover, note that the ROIC of Delta, United, and American Airlines is similar both before and after the pandemic lockdown period, while the ROIC of budget airlines has declined. Data by YCharts. Why Delta will continue to outperform There are many reasons for this bifurcation: Rising labor, airport, and supply chain costs disproportionately hit budget airlines' low-cost and low-margin business models. It's easier for premium airlines to adjust and offer economy seats than it is for budget airlines to "go premium." Delta and other network airlines have substantial loyalty programs and also generate revenue through co-brand credit cards. It all comes together to create an environment where Delta and United are likely to be more resilient in a downturn, particularly against budget airlines, as demonstrated by their ROIC. As such, a lower risk should result in a more favorable risk-reward calculation for Delta, meaning it's not as expensive a stock as many think. Should you invest $1,000 in Delta Air Lines right now? Before you buy stock in Delta Air Lines, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Delta Air Lines wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $660,821!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $886,880!* Now, it's worth noting Stock Advisor 's total average return is791% — a market-crushing outperformance compared to174%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of June 9, 2025
Globe and Mail
12-05-2025
- Business
- Globe and Mail
13 U.S. companies combining profitability and value for outsized returns
What are we looking for? Profitable businesses trading at attractive valuations. When it comes to long-term investing, two of the most powerful drivers of performance are return on invested capital (ROIC) and valuation. Return on capital measures how efficiently a company turns its investments into profits and is an essential indicator of business quality and durability. Meanwhile, valuation metrics like enterprise value over EBITDA (EV/EBITDA) help investors gauge how much they are paying for those profits. Combining robust profitability with low valuation can lead to outsized returns, making this duo a cornerstone of disciplined, fundamentals-based investing. The screen We screened the U.S. universe using the following criteria: For informational purposes, we also added price-to-earnings ratio and dividend yield. More about Inovestor For 25 years as a pioneering Canadian fintech, we've consistently pushed the boundaries to empower investment advisors with advanced, easy-to-use investment strategies. Discover more about our journey and offerings on our website. What we found Lantheus Holdings Inc. LNTH-Q develops imaging agents to improve disease detection and treatment. The company stands out with a stellar ROIC of 63.4 per cent, the second-highest of our list, reflecting highly efficient use of capital. Despite a recent six-month price dip of 8.4 per cent, Lantheus maintains solid fundamentals with a robust three-year annualized cash flow growth of 45.7 per cent. Trading at an EV/EBITDA ratio of 7.6 and 12.2 times earnings, the valuation appears reasonable given its robust financials. Dropbox Inc. DBX-Q is a cloud-based file storage and collaboration platform. With an impressive ROIC of 83.5 per cent, the highest of our list, Dropbox delivers exceptional returns on capital, and its respectable 13.2 per cent three-year cash flow growth shows steady performance. The stock has gained 6.5 per cent in the last six months, indicating positive market sentiment. Despite operating in the valuation-rich tech space, Dropbox trades at a conservative P/E of 11.3, suggesting potential value in the eyes of long-term investors. Altria Group Inc. MO-N, a leading force in the tobacco industry, is known for its strong cash flow and steady shareholder returns. With an impressive ROIC of 39.8 per cent, the company demonstrates outstanding capital efficiency within a mature sector. While Altria offers the highest dividend yield on our list at 6.9 per cent, this comes at the expense of growth, with a modest three-year annualized cash flow increase of just 3.7 per cent, the lowest among our list. Investors are advised to do further research before investing in any of the companies listed in the accompanying table. For more details about these stocks, subscribe to the Inovestor for Advisors platform for free. Anthony Ménard, CFA, is vice-president of data management at Inovestor.
