Ansell's (ASX:ANN) Returns On Capital Are Heading Higher

Simply Wall St
·3 min read

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. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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. So on that note, Ansell (ASX:ANN) looks quite promising in regards to its trends of return on capital.

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

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. Analysts use this formula to calculate it for Ansell:

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

0.12 = US$254m ÷ (US$2.5b - US$360m) (Based on the trailing twelve months to June 2022).

Therefore, Ansell has an ROCE of 12%. In absolute terms, that's a satisfactory return, but compared to the Medical Equipment industry average of 9.8% it's much better.

See our latest analysis for Ansell

roce
roce

Above you can see how the current ROCE for Ansell 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 Ansell here for free.

What The Trend Of ROCE Can Tell Us

Ansell is showing promise given that its ROCE is trending up and to the right. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 39% over the last five years. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

Our Take On Ansell's ROCE

In summary, we're delighted to see that Ansell has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Since the stock has only returned 26% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

If you want to continue researching Ansell, you might be interested to know about the 2 warning signs that our analysis has discovered.

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.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here

  • Up next
  • Up next
  • Up next
  • Up next

Latest Stories

  • Should Canada's rattiest cities worry about leptospirosis? Symptoms to know after New York reports rising cases

    While the disease is rare in Canada, here are the symptoms and risks you should know about.

  • Allstate, IBD Stock Of The Day, Rides Higher Insurance Rates, Better Luck Into Buy Zone

    Allstate is IBD Stock Of The Day as insurers rise thanks to premium increases and higher interest income.

  • NYPD gives details about man who set self on fire outside courthouse where Trump trial is held

    Members of the New York City Police Department held a press conference Friday afternoon shortly after a man set himself on fire outside the courthouse where former President Donald Trump is on trial.

  • Cincinnati police searching for suspects accused of theft at Target store

    Cincinnati police searching for suspects accused of theft at Target store

  • Justin Pippen, Scottie Pippen's youngest son, commits to Michigan

    Justin Pippen, the youngest son of NBA legend Scottie Pippen, announced he will be playing college basketball next season at Michigan.

  • Man in Critical Condition After Setting Himself on Fire Across From Trump Courthouse

    A man who set himself on fire on Friday across from the Manhattan courthouse where jury selection for Trump’s “hush money” trial was taking place is in critical condition, according to police.The man, who was identified as Maxwell Azzarello from Saint Augustine, Florida, threw pamphlets throughout the park, before pouring an accelerant over himself and lighting himself on fire, the NYPD said in a press conference held on Friday afternoon. Emergency responders were eventually able to extinguish the fire, and transported the man to the hospital, police said.“The victim is in critical condition but is alive and intubated at Cornell burn center at this time,” FDNY Commissioner Laura Kavanagh said during the conference. Four officers, including a court officer, sustained “minor injuries” due to their exposure to the fire but are “all fine,” Kavanagh said. Credit: NYPD via Storyful

  • Neighbors in Dorchester say porch theft all too common on their street

    Repeated incidents of porch theft in Dorchester are leaving residents worried about the safety of their purchases.

  • US STOCKS-Nasdaq, S&P tumble as Netflix, chip stocks drag; AmEx boosts Dow

    The Nasdaq and the S&P 500 ended lower on Friday as Netflix shares weighed, but American Express kept the Dow afloat after quarterly earnings from both companies, while growing pessimism that the Federal Reserve would cut interest rates soon also dented sentiment. Netflix slumped as one of the bigger drags on the benchmark S&P index and Nasdaq after the video streaming company's second-quarter revenue view fell short of analysts' expectations while the company also unexpectedly said it would no longer provide subscriber counts.

  • Venue opens doors again more than a year after fatal crush

    The O2 Brixton Academy had heavy security for the reopening.

  • This sale is money: An identity-protecting travel wallet for $10 — could 53,000+ shoppers be wrong?

    'No unexpected coin avalanche': The slim, secure bifold easily keeps all your essentials organized, fans say.

  • Bank of Mexico deputy governor sees rates on hold for longer than expected

    Bank of Mexico Deputy Governor Jonathan Heath said on Friday the benchmark interest rate is likely to remain unchanged for longer than expected by markets, noting it would likely stay put at 11% at the May policy meeting and that the June decision would be data dependent. Speaking to Reuters on the sidelines of the International Monetary Fund and World Bank spring meetings, Heath underscored the importance of waiting until service sector inflation demonstrates a clear downward trajectory, suggesting the possibility of two to four rate cuts this year depending on evolving economic conditions. "Either we meet our inflation target and maybe we could cut, or we don't meet our inflation target and we don't cut," Heath said.

  • Royal couple announce shock divorce - details

    Prince Nikolaos and Princess Tatiana of Greece have confirmed that they are to divorce after 14 years of marriage

  • Watch Avs mascot Bernie crash the Denver7 weather and traffic report!

    Colorado Avalanche mascot Bernie made a cameo appearance during the weather and traffic report on Denver7 News at 6 a.m. Thursday ahead of the Avs' playoff series against the Winnipeg Jets.

  • We meet again: Hurricanes and Islanders reunite to open NHL playoffs for 2nd straight year

    RALEIGH, N.C. (AP) — The Carolina Hurricanes and the New York Islanders are getting another postseason reunion. The teams are meeting in the first round of the NHL playoffs for the second straight season, and this marks the third time the teams will meet in six postseasons. The Hurricanes won both previous matchups, including a six-game series in last year's first round. The Hurricanes are the favorite to win the Stanley Cup, according to Bet MGM Sportsbook, as they enter Saturday's Game 1 at ho

  • Paris Hilton Introduces Daughter London in First Official Photos as Family of Four (Exclusive)

    The mom of two is releasing her song "FAME WON'T LOVE YOU" in collaboration with Sia, just in time for Mother's Day

  • Buffalo Bills owner Terry Pegula explores selling non-controlling, minority stake in franchise

    ORCHARD PARK, N.Y. (AP) — Buffalo Bills owners Terry and Kim Pegula are exploring the possibility of selling a non-controlling, minority interest in the franchise, the team announced on Friday. A person with knowledge of the decision told The Associated Press the stake in the team the Pegulas would be preparing to sell would be about 25%. The person spoke on condition of anonymity because that detail was not announced by the team. It was first reported by The Athletic. The Bills announced the Pe

  • Police to review security outside courthouse hosting Trump's trial after man sets himself on fire

    NEW YORK (AP) — Police officials said they were reviewing whether to restrict access to a public park outside the courthouse where former President Donald Trump is on trial after a man set himself on fire there Friday. “We may have to shut this area down,” New York City Police Department Deputy Commissioner Kaz Daughtry said at a news conference outside the courthouse, adding that officials would discuss the security plan soon. Collect Pond Park has been a gathering spot for protesters, journali

  • As inflation cools, Macklem says different countries will cut rates at own pace

    OTTAWA — Bank of Canada governor Tiff Macklem says central banks will make monetary policy decisions geared toward their own economies, which means some countries may begin cutting interest rates before others. Macklem made the comments while speaking to reporters on the sidelines of International Monetary Fund meetings in Washington, D.C. Friday. "We've all been resolute in our commitment to restore price stability, and we've matched those words with action that has helped us all bring inflatio

  • Whitecaps look to bounce back against Sounders in Cascadia clash

    VANCOUVER — The Vancouver Whitecaps aren't dwelling on their fall from the top spot in Major League Soccer's Western Conference. After all, there's a lot of soccer still to be played. The Whitecaps (4-2-1) dropped a 3-1 decision to the L.A. Galaxy last Saturday and sit in second spot on the West heading into a rivalry matchup with the Sounders (1-3-3) in Seattle this weekend. Moving back up the standings requires moving forward on the field, said Vancouver striker Brian White. “It’s about turnin

  • CANADA STOCKS-TSX pares weekly decline as interest rate sensitive shares gain

    Canada's main stock index edged higher on Friday as energy and interest rate sensitive shares notched gains, with the index outperforming Wall Street and clawing back some of its weekly decline. The Toronto Stock Exchange's S&P/TSX composite index ended up 98.93 points, or 0.5%, at 21,807.37, its third straight day of gains. The Nasdaq and the S&P 500, two major U.S. benchmark indexes, fell after mixed corporate earnings and amid growing pessimism that the Federal Reserve would cut interest rates soon.