What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. And in light of that, the trends we're seeing at Lantheus Holdings' (NASDAQ:LNTH) look very promising so lets take a look.

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Return On Capital Employed (ROCE): What Is It?

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. The formula for this calculation on Lantheus Holdings is:

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

0.26 = US$446m ÷ (US$2.0b - US$241m) (Based on the trailing twelve months to December 2024).

Thus, Lantheus Holdings has an ROCE of 26%. In absolute terms that's a great return and it's even better than the Medical Equipment industry average of 10%.

See our latest analysis for Lantheus Holdings

Above you can see how the current ROCE for Lantheus 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 Lantheus Holdings for free.

The Trend Of ROCE

Investors would be pleased with what's happening at Lantheus Holdings. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 26%. 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 412%. So we're very much inspired by what we're seeing at Lantheus Holdings thanks to its ability to profitably reinvest capital.

Our Take On Lantheus Holdings' ROCE

All in all, it's terrific to see that Lantheus Holdings is reaping the rewards from prior investments and is growing its capital base. And a remarkable 709% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

While Lantheus Holdings looks impressive, no company is worth an infinite price. The intrinsic value infographic for LNTH helps visualize whether it is currently trading for a fair price.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity.

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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.