Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at Barnes & Noble Education (NYSE:BNED) so let's look a bit deeper.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

What Is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Barnes & Noble Education:

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

0.06 = US$33m ÷ (US$1.1b - US$535m) (Based on the trailing twelve months to January 2025).

Thus, Barnes & Noble Education has an ROCE of 6.0%. In absolute terms, that's a low return and it also under-performs the Specialty Retail industry average of 13%.

Check out our latest analysis for Barnes & Noble Education

In the above chart we have measured Barnes & Noble Education'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 Barnes & Noble Education .

What The Trend Of ROCE Can Tell Us

We're pretty happy with how the ROCE has been trending at Barnes & Noble Education. The data shows that returns on capital have increased by 236% over the trailing five years. That's not bad because this tells for every dollar invested (capital employed), the company is increasing the amount earned from that dollar. Speaking of capital employed, the company is actually utilizing 26% less than it was five years ago, which can be indicative of a business that's improving its efficiency. If this trend continues, the business might be getting more efficient but it's shrinking in terms of total assets.

On a separate but related note, it's important to know that Barnes & Noble Education has a current liabilities to total assets ratio of 49%, which we'd consider pretty high. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

In Conclusion...

In a nutshell, we're pleased to see that Barnes & Noble Education has been able to generate higher returns from less capital. Although the company may be facing some issues elsewhere since the stock has plunged 96% in the last five years. Still, it's worth doing some further research to see if the trends will continue into the future.

On a separate note, we've found 3 warning signs for Barnes & Noble Education you'll probably want to know about.

While Barnes & Noble Education may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

Have 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.