Returns On Capital At GE HealthCare Technologies (NASDAQ:GEHC) Have Stalled

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Firstly, we’ll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, 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. With that in mind, the ROCE of GE HealthCare Technologies (NASDAQ:GEHC) looks decent, right now, so lets see what the trend of returns can tell us.

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. Analysts use this formula to calculate it for GE HealthCare Technologies:

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

0.13 = US$3.0b ÷ (US$33b – US$9.6b) (Based on the trailing twelve months to December 2024).

So, GE HealthCare Technologies has an ROCE of 13%. In absolute terms, that’s a satisfactory return, but compared to the Medical Equipment industry average of 10% it’s much better.

View our latest analysis for GE HealthCare Technologies

In the above chart we have measured GE HealthCare Technologies’ 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 GE HealthCare Technologies .

While the current returns on capital are decent, they haven’t changed much. Over the past four years, ROCE has remained relatively flat at around 13% and the business has deployed 33% more capital into its operations. 13% is a pretty standard return, and it provides some comfort knowing that GE HealthCare Technologies has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

To sum it up, GE HealthCare Technologies has simply been reinvesting capital steadily, at those decent rates of return. However, over the last year, the stock hasn’t provided much growth to shareholders in the way of total returns. For that reason, savvy investors might want to look further into this company in case it’s a prime investment.

One more thing to note, we’ve identified 1 warning sign with GE HealthCare Technologies and understanding it should be part of your investment process.