Return on capital employed: the most revealing number in investing

Doing a few basic calculations can save you a lot of heartache when investing. And one calculation stands head and shoulders above the others: the ‘return on capital employed’, or Roce.

So you've found a company that you like the look of.

You think it has some good products, and that it will be able to sell more of them in the years ahead.

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Operating profit (A)973
Total Assets9859
Cash-243
Non-interest bearing current liabilities (NIBCL)-2188
Capital Employed (B)7428
Shareholders' Equity5397
Net debt1472
Provisions548
Pension deficit11
Capital Employed (B)7428
ROCE (A/B)13.10%
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20084.72%2.2910.80%
20094.62%2.4711.42%
20105.89%2.3513.82%
20115.49%2.4513.42%
20125.51%2.3813.10%

Phil spent 13 years as an investment analyst for both stockbroking and fund management companies.

 

After graduating with a MSc in International Banking, Economics & Finance from Liverpool Business School in 1996, Phil went to work for BWD Rensburg, a Liverpool based investment manager. In 2001, he joined ABN AMRO as a transport analyst. After a brief spell as a food retail analyst, he spent five years with ABN's very successful UK Smaller Companies team where he covered engineering, transport and support services stocks.

 

In 2007, Phil joined Halbis Capital Management as a European equities analyst. He began writing for MoneyWeek in 2010.