Returns On Capital Signal Difficult Times Ahead For Crest Nicholson Holdings (LON:CRST)

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What underlying fundamental trends can indicate that a company might be in decline? A business that's potentially in...
decline often shows two trends, a return on capital employed (ROCE) that's declining, and a base of capital employed that's also declining. Trends like this ultimately mean the business is reducing its investments and also earning less on what it has invested. And from a first read, things don't look too good at Crest Nicholson Holdings (LON:CRST), so let's see why.

Return On Capital Employed (ROCE): What is it?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Crest Nicholson Holdings, this is the formula:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.076 = UK£84m ÷ (UK£1.5b - UK£365m) (Based on the trailing twelve months to April 2021).

So, Crest Nicholson Holdings has an ROCE of 7.6%. In absolute terms, that's a low return but it's around the Consumer Durables industry average of 8.9%.

View our latest analysis for Crest Nicholson Holdings

roce

Above you can see how the current ROCE for Crest Nicholson Holdings compares to its prior returns on…
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