Consumer Durables News

YETI Holdings (NYSE:YETI) Is Investing Its Capital With Increasing Efficiency


If you’re not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Firstly, we’d want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Speaking of which, we noticed some great changes in YETI Holdings’ (NYSE:YETI) returns on capital, so let’s have a look.

Return On Capital Employed (ROCE): What Is It?

If you haven’t worked with ROCE before, it measures the ‘return’ (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for YETI Holdings, this is the formula:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)

0.37 = US$264m ÷ (US$983m – US$276m) (Based on the trailing twelve months to October 2022).

So, YETI Holdings has an ROCE of 37%. In absolute terms that’s a great return and it’s even better than the Leisure industry average of 21%.

See our latest analysis for YETI Holdings

NYSE:YETI Return on Capital Employed December 4th 2022

In the above chart we have measured YETI Holdings’ 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 report on analyst forecasts for the company.

What Does the ROCE Trend For YETI Holdings Tell Us?

YETI Holdings is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 37%. The company is effectively making more money per dollar of capital used, and it’s worth noting that the amount of capital has increased too, by 90%. So we’re very much inspired by what we’re seeing at YETI Holdings thanks to its ability to profitably reinvest capital.

Our Take On YETI Holdings’ ROCE

All in all, it’s terrific to see that YETI Holdings is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a solid 50% to shareholders over the last three years, it’s fair to say investors are beginning to recognize these changes. In light of that, we think it’s worth looking further into this stock because if YETI Holdings can keep these trends up, it could have a bright future ahead.

YETI Holdings does have some risks, we noticed 2 warning signs (and 1 which shouldn’t be ignored) we think you should know about.

High returns are a key ingredient to strong performance, so check out our free list ofstocks earning high returns on equity with solid balance sheets.

Valuation is complex, but we’re helping make it simple.

Find out whether YETI Holdings is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

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.


Source link