Is Moneysupermarket.com Group (LON:MONY) Going To Multiply In Value?

Simply Wall St
·3 min read

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. That's why when we briefly looked at Moneysupermarket.com Group's (LON:MONY) ROCE trend, we were very happy with what we saw.

Understanding 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 Moneysupermarket.com Group is:

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

0.46 = UK£111m ÷ (UK£302m - UK£60m) (Based on the trailing twelve months to June 2020).

Therefore, Moneysupermarket.com Group has an ROCE of 46%. In absolute terms that's a great return and it's even better than the Online Retail industry average of 11%.

See our latest analysis for Moneysupermarket.com Group

roce
roce

Above you can see how the current ROCE for Moneysupermarket.com Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

What The Trend Of ROCE Can Tell Us

We'd be pretty happy with returns on capital like Moneysupermarket.com Group. Over the past five years, ROCE has remained relatively flat at around 46% and the business has deployed 54% more capital into its operations. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. If Moneysupermarket.com Group can keep this up, we'd be very optimistic about its future.

On a side note, Moneysupermarket.com Group has done well to reduce current liabilities to 20% of total assets over the last five years. Effectively suppliers now fund less of the business, which can lower some elements of risk.

Our Take On Moneysupermarket.com Group's ROCE

In summary, we're delighted to see that Moneysupermarket.com Group has been compounding returns by reinvesting at consistently high rates of return, as these are common traits of a multi-bagger. Despite the good fundamentals, total returns from the stock have been virtually flat over the last five years. That's why we think it'd be worthwhile to look further into this stock given the fundamentals are appealing.

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation on our platform that is definitely worth checking out.

Moneysupermarket.com Group 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.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.