If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Lifetime Brands (NASDAQ:LCUT) looks quite promising in regards to its trends of return on capital.

What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Lifetime Brands is:

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

0.071 = US$34m ÷ (US$617m - US$146m) (Based on the trailing twelve months to June 2024).

Therefore, Lifetime Brands has an ROCE of 7.1%. Ultimately, that's a low return and it under-performs the Consumer Durables industry average of 14%.

See our latest analysis for Lifetime Brands

In the above chart we have measured Lifetime Brands' 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 analyst report for Lifetime Brands .

What Does the ROCE Trend For Lifetime Brands Tell Us?

You'd find it hard not to be impressed with the ROCE trend at Lifetime Brands. We found that the returns on capital employed over the last five years have risen by 53%. The company is now earning US$0.07 per dollar of capital employed. Speaking of capital employed, the company is actually utilizing 33% less than it was five years ago, which can be indicative of a business that's improving its efficiency. Lifetime Brands may be selling some assets so it's worth investigating if the business has plans for future investments to increase returns further still.

The Key Takeaway

In a nutshell, we're pleased to see that Lifetime Brands has been able to generate higher returns from less capital. Given the stock has declined 18% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. So researching this company further and determining whether or not these trends will continue seems justified.

On a separate note, we've found 1 warning sign for Lifetime Brands you'll probably want to know about.

While Lifetime Brands isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.