The Return Trends At dentalcorp Holdings (TSE:DNTL) Look Promising




  • In Business
  • 2022-11-26 14:12:30Z
  • By Simply Wall St.
 

If you're looking for a multi-bagger, there's a few things to 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, dentalcorp Holdings (TSE:DNTL) looks quite promising in regards to its trends of return on capital.

What Is Return On Capital Employed (ROCE)?

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. Analysts use this formula to calculate it for dentalcorp Holdings:

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

0.0025 = CA$7.8m ÷ (CA$3.3b - CA$207m) (Based on the trailing twelve months to September 2022).

Therefore, dentalcorp Holdings has an ROCE of 0.3%. Ultimately, that's a low return and it under-performs the Healthcare industry average of 8.3%.

Check out our latest analysis for dentalcorp Holdings

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

What Does the ROCE Trend For dentalcorp Holdings Tell Us?

We're delighted to see that dentalcorp Holdings is reaping rewards from its investments and is now generating some pre-tax profits. Shareholders would no doubt be pleased with this because the business was loss-making two years ago but is is now generating 0.3% on its capital. Not only that, but the company is utilizing 29% more capital than before, but that's to be expected from a company trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

The Bottom Line On dentalcorp Holdings' ROCE

In summary, it's great to see that dentalcorp Holdings has managed to break into profitability and is continuing to reinvest in its business. Astute investors may have an opportunity here because the stock has declined 49% in the last year. So researching this company further and determining whether or not these trends will continue seems justified.

One more thing to note, we've identified 1 warning sign with dentalcorp Holdings and understanding it should be part of your investment process.

While dentalcorp Holdings 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) 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.

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