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Yahoo
3 hours ago
- Business
- Yahoo
With A Return On Equity Of 9.8%, Has Exelon Corporation's (NASDAQ:EXC) Management Done Well?
While some investors are already well versed in financial metrics (hat tip), this article is for those who would like to learn about Return On Equity (ROE) and why it is important. We'll use ROE to examine Exelon Corporation (NASDAQ:EXC), by way of a worked example. ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. In simpler terms, it measures the profitability of a company in relation to shareholder's equity. AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early. ROE can be calculated by using the formula: Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity So, based on the above formula, the ROE for Exelon is: 9.8% = US$2.7b ÷ US$28b (Based on the trailing twelve months to March 2025). The 'return' is the profit over the last twelve months. One way to conceptualize this is that for each $1 of shareholders' capital it has, the company made $0.10 in profit. View our latest analysis for Exelon By comparing a company's ROE with its industry average, we can get a quick measure of how good it is. The limitation of this approach is that some companies are quite different from others, even within the same industry classification. The image below shows that Exelon has an ROE that is roughly in line with the Electric Utilities industry average (9.2%). So while the ROE is not exceptional, at least its acceptable. Although the ROE is similar to the industry, we should still perform further checks to see if the company's ROE is being boosted by high debt levels. If a company takes on too much debt, it is at higher risk of defaulting on interest payments. Our risks dashboardshould have the 2 risks we have identified for Exelon. Companies usually need to invest money to grow their profits. The cash for investment can come from prior year profits (retained earnings), issuing new shares, or borrowing. In the case of the first and second options, the ROE will reflect this use of cash, for growth. In the latter case, the use of debt will improve the returns, but will not change the equity. In this manner the use of debt will boost ROE, even though the core economics of the business stay the same. It's worth noting the high use of debt by Exelon, leading to its debt to equity ratio of 1.75. With a fairly low ROE, and significant use of debt, it's hard to get excited about this business at the moment. Investors should think carefully about how a company might perform if it was unable to borrow so easily, because credit markets do change over time. Return on equity is useful for comparing the quality of different businesses. In our books, the highest quality companies have high return on equity, despite low debt. If two companies have around the same level of debt to equity, and one has a higher ROE, I'd generally prefer the one with higher ROE. Having said that, while ROE is a useful indicator of business quality, you'll have to look at a whole range of factors to determine the right price to buy a stock. Profit growth rates, versus the expectations reflected in the price of the stock, are a particularly important to consider. So I think it may be worth checking this free report on analyst forecasts for the company. Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) 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. Sign in to access your portfolio
Yahoo
7 hours ago
- Business
- Yahoo
Gelsenwasser (FRA:WWG) Is Reinvesting At Lower Rates Of Return
Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, 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. However, after investigating Gelsenwasser (FRA:WWG), we don't think it's current trends fit the mold of a multi-bagger. AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early. For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Gelsenwasser: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.019 = €40m ÷ (€3.0b - €867m) (Based on the trailing twelve months to December 2024). Thus, Gelsenwasser has an ROCE of 1.9%. In absolute terms, that's a low return and it also under-performs the Integrated Utilities industry average of 7.5%. Check out our latest analysis for Gelsenwasser While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Gelsenwasser has performed in the past in other metrics, you can view this free graph of Gelsenwasser's past earnings, revenue and cash flow. On the surface, the trend of ROCE at Gelsenwasser doesn't inspire confidence. Around five years ago the returns on capital were 2.9%, but since then they've fallen to 1.9%. Given the business is employing more capital while revenue has slipped, this is a bit concerning. If this were to continue, you might be looking at a company that is trying to reinvest for growth but is actually losing market share since sales haven't increased. From the above analysis, we find it rather worrisome that returns on capital and sales for Gelsenwasser have fallen, meanwhile the business is employing more capital than it was five years ago. It should come as no surprise then that the stock has fallen 56% over the last five years, so it looks like investors are recognizing these changes. That being the case, unless the underlying trends revert to a more positive trajectory, we'd consider looking elsewhere. If you want to continue researching Gelsenwasser, you might be interested to know about the 1 warning sign that our analysis has discovered. While Gelsenwasser may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here. — 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) 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. Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Yahoo
7 hours ago
- Business
- Yahoo
Gelsenwasser (FRA:WWG) Is Reinvesting At Lower Rates Of Return
Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, 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. However, after investigating Gelsenwasser (FRA:WWG), we don't think it's current trends fit the mold of a multi-bagger. AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early. For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Gelsenwasser: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.019 = €40m ÷ (€3.0b - €867m) (Based on the trailing twelve months to December 2024). Thus, Gelsenwasser has an ROCE of 1.9%. In absolute terms, that's a low return and it also under-performs the Integrated Utilities industry average of 7.5%. Check out our latest analysis for Gelsenwasser While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Gelsenwasser has performed in the past in other metrics, you can view this free graph of Gelsenwasser's past earnings, revenue and cash flow. On the surface, the trend of ROCE at Gelsenwasser doesn't inspire confidence. Around five years ago the returns on capital were 2.9%, but since then they've fallen to 1.9%. Given the business is employing more capital while revenue has slipped, this is a bit concerning. If this were to continue, you might be looking at a company that is trying to reinvest for growth but is actually losing market share since sales haven't increased. From the above analysis, we find it rather worrisome that returns on capital and sales for Gelsenwasser have fallen, meanwhile the business is employing more capital than it was five years ago. It should come as no surprise then that the stock has fallen 56% over the last five years, so it looks like investors are recognizing these changes. That being the case, unless the underlying trends revert to a more positive trajectory, we'd consider looking elsewhere. If you want to continue researching Gelsenwasser, you might be interested to know about the 1 warning sign that our analysis has discovered. While Gelsenwasser may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here. — 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) 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.
Yahoo
2 days ago
- Business
- Yahoo
Returns On Capital At Cascades (TSE:CAS) Have Stalled
Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Although, when we looked at Cascades (TSE:CAS), it didn't seem to tick all of these boxes. This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality. 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 Cascades, this is the formula: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.06 = CA$236m ÷ (CA$5.1b - CA$1.1b) (Based on the trailing twelve months to March 2025). Thus, Cascades has an ROCE of 6.0%. In absolute terms, that's a low return and it also under-performs the Packaging industry average of 12%. See our latest analysis for Cascades In the above chart we have measured Cascades' prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Cascades for free. Over the past five years, Cascades' ROCE and capital employed have both remained mostly flat. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. With that in mind, unless investment picks up again in the future, we wouldn't expect Cascades to be a multi-bagger going forward. In a nutshell, Cascades has been trudging along with the same returns from the same amount of capital over the last five years. And in the last five years, the stock has given away 27% so the market doesn't look too hopeful on these trends strengthening any time soon. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere. One more thing: We've identified 3 warning signs with Cascades (at least 2 which shouldn't be ignored) , and understanding these would certainly be useful. While Cascades isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) 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. 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
3 days ago
- Automotive
- Yahoo
Better Stock-Split Stock: Fastenal, O'Reilly Automotive, or Interactive Brokers?
Fastenal is the easy pick for income investors among these three stock-split stocks. Value investors probably won't like any of these stocks, although Interactive Brokers has the lowest forward earnings multiple. Growth investors will likely prefer O'Reilly Automotive. 10 stocks we like better than O'Reilly Automotive › On the surface, Fastenal (NASDAQ: FAST), O'Reilly Automotive (NASDAQ: ORLY), and Interactive Brokers Group (NASDAQ: IBKR) might seem to have practically nothing in common. Fastenal is a leader in the distribution of industrial and construction supplies, especially fasteners. O'Reilly operates a chain of after-market auto parts stores. Interactive Brokers runs a popular online brokerage. But these three stocks share at least one common denominator. They've each announced stock splits this year. Fastenal conducted a 2-for-1 stock split on May 22. O'Reilly had a 15-for-1 stock split on June 9. Interactive Brokers split its stock 4-for-1 on June 17. Which of these three stock-split stocks is the best pick for investors now? Here's how Fastenal, O'Reilly, and Interactive Brokers compare. O'Reilly Automotive leads the pack on some key financial metrics. The company generated revenue of $16.87 billion over the last 12 months, well above Fastenal's $7.61 billion and Interactive Brokers' $5.4 billion. Unsurprisingly, it also posted the greatest profits. But when it comes to profitability, based on net profit margin, the three stocks are neck-and-neck. Fastenal comes out slightly ahead, though, with a net profit margin of 15.1% versus O'Reilly's and Interactive Brokers' net profit margins of 14.1% and 14.7%, respectively. Interactive Brokers appears to claim the strongest balance sheet. Its cash position of nearly $89.7 billion is more than five times greater than its debt of $17.15 billion. Fastenal's and O'Reilly's debt loads are larger than their cash stockpiles. There's no contest between these three stock-split stocks on current growth. Interactive Brokers' revenue jumped 18.6% year over year in the first quarter of 2025, with earnings soaring 21.7%. The growth delivered by Fastenal and O'Reilly pales in comparison. Fastenal's net sales rose by 3.4% year over year in Q1. Its earnings edged only 0.3% higher. O'Reilly reported revenue growth of 4%, with earnings declining by 1.6%. What about future growth? O'Reilly comes out on top, at least according to analysts surveyed by LSEG. Wall Street projects the auto parts chain to deliver earnings growth of 12.5% next year, higher than the estimates of 9.8% earnings growth for Fastenal and 7.3% growth for Interactive Brokers. Which stock is valued most attractively depends on how far you look into the future. Interactive Brokers has the lowest trailing 12-month price-to-earnings ratio and forward P/E multiple (which looks ahead one year). However, O'Reilly boasts a lower price-to-earnings-to-growth (PEG) ratio (which is based on analysts' five-year earnings growth projections) than Fastenal. LSEG didn't provide a PEG ratio for Interactive Brokers. As we have already seen, though, analysts seem to think that O'Reilly will deliver stronger earnings growth going forward. It's an easy decision in crowning a dividend winner among these three stocks. Fastenal takes the prize with its forward dividend yield of 2.13%. The construction and industrial parts distributor has also increased its dividend for an impressive 27 consecutive years. Interactive Brokers' forward dividend yield is a puny 0.63%. The online brokerage has increased its dividend for only two years in a row. O'Reilly doesn't currently offer a dividend. Your investment style will dictate which of these stock-split stocks is the best choice for you. If you're an income investor, Fastenal is the easy pick. Value investors probably won't find any of these stocks very appealing. However, I view O'Reilly Automotive as the most attractively valued of the three. My opinion is based largely on O'Reilly's stronger growth prospects, which make it the best option for growth investors. Since O'Reilly wins in two areas, I also think it's the best overall pick. By the way, the stock splits for Fastenal, O'Reilly, and Interactive Brokers make no difference whatsoever in which stock to buy. All the splits do is make the respective share prices lower, but they don't impact the underlying businesses at all. Before you buy stock in O'Reilly Automotive, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and O'Reilly Automotive 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 $676,023!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $883,692!* Now, it's worth noting Stock Advisor's total average return is 793% — a market-crushing outperformance compared to 173% 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 Keith Speights has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Interactive Brokers Group. The Motley Fool recommends the following options: long January 2027 $175 calls on Interactive Brokers Group and short January 2027 $185 calls on Interactive Brokers Group. The Motley Fool has a disclosure policy. Better Stock-Split Stock: Fastenal, O'Reilly Automotive, or Interactive Brokers? was originally published by The Motley Fool
