We Like IES Holdings' (NASDAQ:IESC) Returns And Here's How They're Trending
If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at the ROCE trend of IES Holdings (NASDAQ:IESC) we really liked what we saw.
Return On Capital Employed (ROCE): What Is It?
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 IES Holdings is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.40 = US$385m ÷ (US$1.6b - US$633m) (Based on the trailing twelve months to September 2025).
Thus, IES Holdings has an ROCE of 40%. That's a fantastic return and not only that, it outpaces the average of 16% earned by companies in a similar industry.
See our latest analysis for IES Holdings
Above you can see how the current ROCE for IES Holdings compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering IES Holdings for free.
What Can We Tell From IES Holdings' ROCE Trend?
The trends we've noticed at IES Holdings are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 40%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 203%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.
In Conclusion...
To sum it up, IES Holdings has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 680% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if IES Holdings can keep these trends up, it could have a bright future ahead.
One more thing, we've spotted 1 warning sign facing IES Holdings that you might find interesting.
If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.
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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.