Returns At JELD-WEN Holding (NYSE:JELD) Appear To Be Weighed Down

JELD-WEN Holding, Inc. 0.00% Pre

JELD-WEN Holding, Inc.





0.00% Pre

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. However, after investigating JELD-WEN Holding (NYSE:JELD), we don't think it's current trends fit the mold of a multi-bagger.

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

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. The formula for this calculation on JELD-WEN Holding is:

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

0.11 = US$254m ÷ (US$3.0b - US$736m) (Based on the trailing twelve months to September 2023).

Thus, JELD-WEN Holding has an ROCE of 11%. In isolation, that's a pretty standard return but against the Building industry average of 16%, it's not as good.

Check out our latest analysis for JELD-WEN Holding

NYSE:JELD Return on Capital Employed January 30th 2024

In the above chart we have measured JELD-WEN Holding's 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.

How Are Returns Trending?

Over the past five years, JELD-WEN Holding's ROCE and capital employed have both remained mostly flat. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect JELD-WEN Holding to be a multi-bagger going forward.

What We Can Learn From JELD-WEN Holding's ROCE

In summary, JELD-WEN Holding isn't compounding its earnings but is generating stable returns on the same amount of capital employed. Unsurprisingly, the stock has only gained 9.1% over the last five years, which potentially indicates that investors are accounting for this going forward. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.

One more thing, we've spotted 1 warning sign facing JELD-WEN Holding that you might find interesting.

While JELD-WEN Holding 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.

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