If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So on that note, CareCloud $(CCLD)$ looks quite promising in regards to its trends of return on capital.

Our free stock report includes 3 warning signs investors should be aware of before investing in CareCloud. Read for free now.

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

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on CareCloud is:

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

0.19 = US$9.7m ÷ (US$72m - US$20m) (Based on the trailing twelve months to December 2024).

Thus, CareCloud has an ROCE of 19%. On its own, that's a standard return, however it's much better than the 6.8% generated by the Healthcare Services industry.

View our latest analysis for CareCloud

In the above chart we have measured CareCloud'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 CareCloud .

What Can We Tell From CareCloud's ROCE Trend?

CareCloud's ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 12,505% whilst employing roughly the same amount of capital. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

In Conclusion...

In summary, we're delighted to see that CareCloud has been able to increase efficiencies and earn higher rates of return on the same amount of capital. However the stock is down a substantial 82% in the last five years so there could be other areas of the business hurting its prospects. In any case, we believe the economic trends of this company are positive and looking into the stock further could prove rewarding.

CareCloud does have some risks, we noticed 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and 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.