What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. So when we looked at the ROCE trend of DICK'S Sporting Goods (NYSE:DKS) we really liked what we saw.

What Is Return On Capital Employed (ROCE)?

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. Analysts use this formula to calculate it for DICK'S Sporting Goods:

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

0.22 = US$1.5b ÷ (US$9.9b - US$2.9b) (Based on the trailing twelve months to August 2024).

Therefore, DICK'S Sporting Goods has an ROCE of 22%. In absolute terms that's a great return and it's even better than the Specialty Retail industry average of 12%.

Above you can see how the current ROCE for DICK'S Sporting Goods compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for DICK'S Sporting Goods .

What Can We Tell From DICK'S Sporting Goods' ROCE Trend?

Investors would be pleased with what's happening at DICK'S Sporting Goods. Over the last five years, returns on capital employed have risen substantially to 22%. The amount of capital employed has increased too, by 41%. So we're very much inspired by what we're seeing at DICK'S Sporting Goods thanks to its ability to profitably reinvest capital.

The Bottom Line On DICK'S Sporting Goods' ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what DICK'S Sporting Goods has. Since the stock has returned a staggering 558% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation for DKS that compares the share price and estimated value.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity.

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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.