Some Investors May Be Worried About Dow's (NYSE:DOW) Returns On Capital

Simply Wall St.11-10

When we're researching a company, it's sometimes hard to find the warning signs, but there are some financial metrics that can help spot trouble early. Typically, we'll see the trend of both return on...

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Typically, we'll see the trend of both return on...</p>\n\n<a href=\"https://finance.yahoo.com/news/investors-may-worried-dows-nyse-110107110.html\">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":"ISBC","symbol_name":"投资者银行","start_time":0,"source_url":"https://finance.yahoo.com/news/investors-may-worried-dows-nyse-110107110.html","article_id":"2482524152","we_media_id":null,"thumbnails":["https://s.yimg.com/uu/api/res/1.2/ybIN6UADg6lzqX3PqNw.KQ--~B/aD00MzI7dz0xMTk0O2FwcGlkPXl0YWNoeW9u/https://media.zenfs.com/en/simply_wall_st__316/b6651b02293f0a57ba2ad962c63e215d"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2482524152","pubTimestamp":1731236467,"sourceInfo":{"source_id":"yahoofinance","name":"雅虎金融"},"weMediaInfo":null,"summary":"When we're researching a company, it's sometimes hard to find the warning signs, but there are some financial metrics that can help spot trouble early. Typically, we'll see the trend of both return on capital employed  declining and this usually coincides with a decreasing amount of capital employed. This reveals that the company isn't compounding shareholder wealth because returns are falling and its net asset base is shrinking. So after we looked into Dow , the trends above didn't look too great.For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Dow is:. Return on Capital Employed = Earnings Before Interest and Tax  ÷ . Therefore, Dow has an ROCE of 4.4%. Ultimately, that's a low return and it under-performs the Chemicals industry average of 8.5%.NYSE:DOW Return on Capital Employed November 10th 2024","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"ISBC":"投资者银行","BK4090":"商品化工","BK4211":"区域性银行","NYSE":"纽交所","BK4585":"ETF&股票定投概念","DOW":"陶氏化学","BK4588":"碎股","EBIT":"Harbor AlphaEdge Small Cap Earners ETF"},"translate_title":"一些投资者可能担心陶氏化学（纽约证券交易所股票代码：DOW）的资本回报率","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"DOW":1,"EBIT":1,"ISBC":1,"NYSE":1},"content_text":"When we're researching a company, it's sometimes hard to find the warning signs, but there are some financial metrics that can help spot trouble early. Typically, we'll see the trend of both return on capital employed (ROCE) declining and this usually coincides with a decreasing amount of capital employed. This reveals that the company isn't compounding shareholder wealth because returns are falling and its net asset base is shrinking. So after we looked into Dow (NYSE:DOW), the trends above didn't look too great. \n What Is Return On Capital Employed (ROCE)? \n For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Dow is: \n Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) \n0.044 = US$2.1b ÷ (US$59b - US$11b) (Based on the trailing twelve months to September 2024).\n Therefore, Dow has an ROCE of 4.4%. Ultimately, that's a low return and it under-performs the Chemicals industry average of 8.5%. \n See our latest analysis for Dow \n\n\n\n  NYSE:DOW Return on Capital Employed November 10th 2024\n \n\n In the above chart we have measured Dow's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Dow . \n What The Trend Of ROCE Can Tell Us \n We are a bit worried about the trend of returns on capital at Dow. About five years ago, returns on capital were 7.5%, however they're now substantially lower than that as we saw above. And on the capital employed front, the business is utilizing roughly the same amount of capital as it was back then. Companies that exhibit these attributes tend to not be shrinking, but they can be mature and facing pressure on their margins from competition. So because these trends aren't typically conducive to creating a multi-bagger, we wouldn't hold our breath on Dow becoming one if things continue as they have. \n The Bottom Line \n In the end, the trend of lower returns on the same amount of capital isn't typically an indication that we're looking at a growth stock. Despite the concerning underlying trends, the stock has actually gained 9.8% over the last five years, so it might be that the investors are expecting the trends to reverse. Regardless, we don't like the trends as they are and if they persist, we think you might find better investments elsewhere. \n If you want to know some of the risks facing Dow we've found 3 warning signs (1 is a bit unpleasant!) that you should be aware of before investing here. \n While Dow isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets. \nHave 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":1},"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":"4.29.2","shortVersion":"4.29.2","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/2482524152"}