A
high return on capital employed is a validation of a company’s
competitive advantage and tends to be an attribute of growth
companies. The first column shows the return on capital
employed, based on the last annual report, and the second
column shows the trend over the last five years. Be concerned
if it is declining rapidly. The prospective PER, five-year
historic growth rate, prospective growth rate and prospective
PEG (if applicable) are also clearly of interest. The final
column has been allocated to margin, which will, in most
cases, be substantial. Companies with a high return on
capital usually generate a high return on sales.
REFS is
a mine of invaluable information for the private investor.
