Return trends at Badger Meter (NYSE: BMI) are unattractive

There are a few key trends to look for if we are to identify the next multi-bagger. First, we will want to see a to recover on capital employed (ROCE) which increases and, on the other hand, a based capital employed. If you see this, it usually means it’s a company with a great business model and plenty of profitable reinvestment opportunities. With this in mind, the ROCE of Badger meter (NYSE: BMI) looks decent, right now, so let’s see what the yield trend can tell us.

What is Return on Employee Capital (ROCE)?

For those who don’t know, ROCE is a measure of a company’s annual pre-tax profit (its return), relative to the capital employed in the company. To calculate this metric for Badger Meter, here is the formula:

Return on capital employed = Profit before interest and taxes (EBIT) ÷ (Total assets – Current liabilities)

0.17 = US $ 73 million ÷ (US $ 499 million – US $ 72 million) (Based on the last twelve months up to June 2021).

So, Badger Meter has a ROCE of 17%. On its own, this is a standard return, but it is much better than the 10% generated by the electronics industry.

See our latest review for Badger Meter

NYSE: BMI Return on Capital Employee September 24, 2021

In the graph above, we measured Badger Meter’s past ROCE against its past performance, but the future is arguably more important. If you are interested, you can view analyst forecasts in our free analyst forecast report for the company.

What can we say about Badger Meter’s ROCE trend?

The ROCE trend doesn’t stand out much, but overall returns are okay. Over the past five years, ROCE has remained relatively stable at around 17% and the company has deployed 62% additional capital in its operations. Given that 17% is moderate ROCE, it’s good to see that a company can keep reinvesting at these decent rates of return. Stable returns in this basic stage can be unattractive, but if they can be sustained over the long term, they often offer nice rewards for shareholders.

One more thing to note, although ROCE has remained relatively stable over the past five years, reducing current liabilities to 14% of total assets, is good to see from an owner’s perspective. ‘business. This can eliminate some of the risks inherent in operations, as the company has fewer unpaid obligations to its suppliers and / or short-term creditors than before.

In conclusion…

To sum up, Badger Meter simply reinvested capital regularly, at these decent rates of return. On top of that, the stock rewarded shareholders with a remarkable 234% return for those who have held it in the past five years. So while investors seem to recognize these promising trends, we still believe the stock deserves further research.

Badger Meter does come with some risks, however, and we have spotted 1 warning sign for Badger Meter that might interest you.

Although Badger Meter does not generate the highest yield, check out this free list of companies that generate high returns on equity with strong balance sheets.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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