Why You Should Care About Karooooo's (NASDAQ:KARO) Strong Returns On Capital

Simply Wall St.11-01

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE)...

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Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE)...</p>\n\n<a href=\"https://simplywall.st/stocks/us/software/nasdaq-karo/karooooo/news/why-you-should-care-about-karooooos-nasdaqkaro-strong-return\">Source Link</a>\n\n</div>\n","source":"simplywall_highlight","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Why You Should Care About Karooooo's (NASDAQ:KARO) Strong Returns On Capital</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWhy You Should Care About Karooooo's (NASDAQ:KARO) Strong Returns On Capital\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-01 03:10 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://simplywall.st/stocks/us/software/nasdaq-karo/karooooo/news/why-you-should-care-about-karooooos-nasdaqkaro-strong-return><strong>Simply Wall St.</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>To find a multi-bagger stock, what are the underlying trends we should look for in a business?  Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE)...</p>\n\n<a href=\"https://simplywall.st/stocks/us/software/nasdaq-karo/karooooo/news/why-you-should-care-about-karooooos-nasdaqkaro-strong-return\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"IE00BGHQF748.EUR","symbol_name":"GUINNESS GLOBAL MONEY MANAGERS \"C\" (EUR) ACC","start_time":0,"source_url":"https://simplywall.st/stocks/us/software/nasdaq-karo/karooooo/news/why-you-should-care-about-karooooos-nasdaqkaro-strong-return","article_id":"2480093949","we_media_id":null,"thumbnails":["https://images.simplywall.st/asset/industry/8041000-choice2-main-header/1585186556238"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2480093949","pubTimestamp":1730401843,"sourceInfo":{"source_id":"simplywall_highlight","name":"Simply Wall St."},"weMediaInfo":null,"summary":"To find a multi-bagger stock, what are the underlying trends we should look for in a business? Amongst other things...","collect":0,"end_time":0,"defaultTopTitle":"simplywall.st","property":[],"viewcount":null,"language":"en","relate_stocks":{"IE00BGHQF748.EUR":"GUINNESS GLOBAL MONEY MANAGERS \"C\" (EUR) ACC","BK4539":"次新股","BK4023":"应用软件","EBIT":"Harbor AlphaEdge Small Cap Earners ETF","LU2210149790.SGD":"Natixis Thematics Subscription Economy R/A SGD-H","KARO":"Karooooo Ltd.","BK4585":"ETF&股票定投概念","NDAQ":"纳斯达克OMX交易所","QLD":"纳指两倍做多ETF","LU2210150020.SGD":"Natixis Thematics Subscription Economy R/A SGD","LU2095319765.USD":"Natixis Thematics Subscription Economy R/A USD","PSQ":"纳指反向ETF","BK4588":"碎股","SQQQ":"纳指三倍做空ETF","IE00BKPKM429.USD":"NEUBERGER BERMAN GLOBAL SUSTAINABLE EQUITY \"A\" (USD) ACC",".IXIC":"NASDAQ Composite","TQQQ":"纳指三倍做多ETF","IE00B64PRP62.GBP":"GUINNESS GLOBAL MONEY MANAGERS \"C\" (GBP) ACC","QID":"纳指两倍做空ETF","IE00B3QW5Z07.USD":"GUINNESS GLOBAL MONEY MANAGERS \"C\" (USD) ACC","BK4112":"金融交易所和数据"},"translate_title":"为什么您应该关心Karooooo（纳斯达克：KARO）强劲的资本回报","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"EBIT":1,"NDAQ":1,".IXIC":1,"KARO":1,"TQQQ":0.6,"SQQQ":0.6,"QLD":0.6,"QID":0.6,"PSQ":0.6,"NQmain":0.6,"MNQmain":0.6},"content_text":"To find a multi-bagger stock, what are the underlying trends we should look for in a business?  Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed.  This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns.    Ergo, when we looked at the ROCE trends at Karooooo (NASDAQ:KARO), we liked what we saw.     Understanding Return On Capital Employed (ROCE)  Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business.  The formula for this calculation on Karooooo is:  Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.35 = R1.2b ÷ (R4.4b - R1.1b) (Based on the trailing twelve months to August 2024). Thus, Karooooo has an ROCE of 35%.  That's a fantastic return and not only that, it outpaces the average of 8.7% earned by companies in a similar industry.    View our latest analysis for Karooooo NasdaqCM:KARO Return on Capital Employed October 31st 2024 In the above chart we have measured Karooooo's prior ROCE against its prior performance, but the future is arguably more important.  If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Karooooo .  What Can We Tell From Karooooo's ROCE Trend?  In terms of Karooooo's history of ROCE, it's quite impressive.   The company has consistently earned 35% for the last  five years, and the capital employed within the business has risen 154% in that time.   With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return.  If Karooooo can keep this up, we'd be very optimistic about its future.    The Bottom Line  In short, we'd argue Karooooo has the makings of a multi-bagger since its been able to compound its capital at very profitable rates of return.        And since the stock has risen strongly over the last three years, it appears the market might expect this trend to continue.   So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.     On a separate note, we've found   1 warning sign for Karooooo   you'll probably want to know about.     Karooooo 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. Valuation is complex, but we're here to simplify it.Discover if Karooooo might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.Access Free AnalysisHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2480093949"}