Investors Will Want Expedia Group’s (NASDAQ:EXPE) Growth In ROCE To Persist

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at Expedia Group (NASDAQ:EXPE) and its trend of ROCE, we really liked what we saw.

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 Expedia Group, this is the formula:

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

0.18 = US$1.5b ÷ (US$23b – US$15b) (Based on the trailing twelve months to September 2024).

So, Expedia Group has an ROCE of 18%. In absolute terms, that’s a satisfactory…