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Boohoo - Return On Capital Employed (ROCE)
One of the quality measurements for a great growth share like Boohoo is its 5-year Return on Capital Employed (ROCE), which is about 22.6%. Long-term, double-digit ROCEs can be a hallmark of companies with the power to grow very profitably.
ROCE is a clue to help you in the search for shares with the potential to deliver solid investment profits over many years.
Return on capital employed (ROCE) for the past five years for Boohoo starting for the year ending 29 February 2020 was 27.89%, 28 February 2019 was 23.07%, 28 February 2018 was 21.98%, 28 February 2017 was 33.76%, 29 February 2016 was 20.38%
The best UK shares/businesses make excellent returns on the money they invest. In financial jargon, this is the return on capital employed (ROCE). Think of it as the interest rate that a company earns on its money, just like a rate you’d get in a savings account. Anything over 20% is very good.
ROCE measures profits before interest and taxes and is more precise than return-on-assets (ROA) or return-on-equity (ROE), as it takes into account all money employed in generating profits.
Warren Buffett is a big believer in ROCE. So too are top fund managers Terry Smith and Nick Train. They know a company that’s able to grow its value by reinvesting profits can make you rich, even if you pay a high price for its stock.
BuffetsloveChild - great comment as always and thank you so much for sharing it.
The BIG 5 Numbers
There are lots of ways to analyse and believe me it takes a lot of time and effort to get it all done. I recommend you read a book called Rule 1 investing by Phil Town and listen to his podcasts about checklists. (Buffet Style Investing).
There is a great way to do an initial assessment on a company to evaluate the quality of the business and the management and that is what Phil Town calls the big 5 numbers. All of these should be above 10% as a rule. It is virtually impossible to find companies that hit the figures at present, but BOO exceeds in all 5 areas (at time of my initial analysis a few months back). Rates here are averaged over 5 years!
Return on Invested Capital (ROIC) 21.5%. (how much money it can make with the money it has)
Sales Growth Rate 45%
Earnings per share Growth Rate 26.7%
Book to Share Growth Rate 26.6 %
Free Cash Growth Rate 35%.
This as always, is intended for open debate. I will never tell anybody right or wrong because it doesn’t exist in this game. But you can load the dice in your favour to buy amazing business at a discounted price which is where I believe we are right now. https://www.ruleoneinvesting.com/blog/how-to-invest/the_big_five_na/
hln - read the weekend Financial Times from cover to cover every weekend and if possible every day.
assume everything on internet boards is fake until proven otherwise. that might mean digging up past financial reports or reading through corporate news releases yourself. you can access past data on line free at https://www.investegate.co.uk/ here you will find corporate reports and news releases. they don't deal in rumours, just the real news. its a good start for fundamental research and enough unless you plan to trade short term, for which you should be prepared to invest in a strong newsfeed and real time prices, along with a charting package. you may not particularly feel technical levels on charts offer anything, but because literally thousands do, you should be aware of levels of technical interest, as it often becomes a self fulfilling prophecy.
Basically its an insurance policy against getting thrown off the board for unscrupulous statements that are set out as facts but are actually very speculative. And trust me steveknowsnothin's tea leaves are worth reading! The guy knows what he's talking about
It means don't believe anything that anyone says on these boards or anywhere else blindly, especially me.
My research involves mostly tea leaves.
When people say 'do your own research', what exactly do people mean? I'm new to this, and where as the numbers and technical aspects of researching a potential buy go abit over my head, I do dig fairly deep into fundamental analysis. What anyone be willing to share their in's & out's of what their 'research' involves? Would be much appreciated! Not sure if theres an etiquette to asking for that sort of question at all so apologies if its frowned upon asking how someone research's their stocks!
On a side note... in to the tune of 4k shares at an average of 300p with Boohoo and currently up around 3k in profit, very happy with that for my first big buy!