Snap Stock

There are a few key trends to look for if we want to identify the next 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So, when we ran our eye over

Snap-on's (NYSE:SNA) trend of ROCE, we really liked what we saw.

Return On Capital Employed (ROCE): What is it?

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

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

0.20 = US$1.1b ÷ (US$6.6b - US$980m) (Based on the trailing twelve months to October 2021).

So,

Snap-on has an ROCE of 20%. That's a fantastic return and not only that, it outpaces the average of 10% earned by companies in a similar industry.

roceNYSE:SNA Return on Capital Employed December 6th 2021

Above you can see how the current ROCE for Snap-on 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 Snap-on here for

free.

What Can We Tell From Snap-on's ROCE Trend?

Snap-on deserves to be commended in regards to it's returns. The company has employed 50% more capital in the last five years, and the returns on that capital have remained stable at 20%. Returns like this are the envy of most businesses and given it has repeatedly reinvested at these rates, that's even better. If Snap-on can keep this up, we'd be very optimistic about its future.

The Bottom Line On Snap-on's ROCE

In short, we'd argue Snap-on has the makings of a multi-bagger since its been able to compound its capital at very profitable rates of return. In light of this, the stock has only gained 35% over the last five years for shareholders who have owned the stock in this period. That's why it could be worth your time looking into this stock further to discover if it has more traits of a multi-bagger.

On a separate note, we've found > 1 warning sign for Snap-on

you'll probably want to know about.

Snap-on is not the only stock earning high returns. If you'd like to see more, check out our

free list of companies earning high returns on equity with solid fundamentals.

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.

Source : https://www.nasdaq.com/articles/snap-on-nyse:sna-is-reinvesting-to-multiply-in-value

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Snap-on (NYSE:SNA) Is Reinvesting To Multiply In Value

Source:Nasdaq

Snap-on (NYSE:SNA) Is Reinvesting To Multiply In Value

SNAP ALERT: Labaton Sucharow Announces the Filing of a Securities Class Action Against Snap Inc. - SNAP

Source:YAHOO!Finance

SNAP ALERT: Labaton Sucharow Announces the Filing of a Securities Class Action Against Snap Inc. - SNAP

Could The Market Be Wrong About Snap-on Incorporated (NYSE:SNA) Given Its Attractive Financial Prospects?

Source:YAHOO!Finance

Could The Market Be Wrong About Snap-on Incorporated (NYSE:SNA) Given Its Attractive Financial Prospects?

Snap Inc. (SNAP) Volatility Hits 5.51% – Here’s What A Good Investor Should Do

Source:stocksregister

Snap Inc. (SNAP) Volatility Hits 5.51% – Here’s What A Good Investor Should Do