When we're researching a company, it's sometimes hard to find the warning signs, but there are some financial metrics that can help spot trouble early. More often than not, we'll see a declining return on capital employed (ROCE) and a declining amount of capital employed. Trends like this ultimately mean the business is reducing its investments and also earning less on what it has invested. On that note, looking into ACCO Brands (NYSE:ACCO), we weren't too upbeat about how things were going.
What Is Return On Capital Employed (ROCE)?
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. To calculate this metric for ACCO Brands, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.07 = US$129m ÷ (US$2.3b - US$421m) (Based on the trailing twelve months to March 2025).
So, ACCO Brands has an ROCE of 7.0%. Ultimately, that's a low return and it under-performs the Commercial Services industry average of 10%.
View our latest analysis for ACCO Brands
Above you can see how the current ROCE for ACCO Brands compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for ACCO Brands .
What Can We Tell From ACCO Brands' ROCE Trend?
We are a bit worried about the trend of returns on capital at ACCO Brands. Unfortunately the returns on capital have diminished from the 9.8% that they were earning five years ago. And on the capital employed front, the business is utilizing roughly the same amount of capital as it was back then. This combination can be indicative of a mature business that still has areas to deploy capital, but the returns received aren't as high due potentially to new competition or smaller margins. If these trends continue, we wouldn't expect ACCO Brands to turn into a multi-bagger.
In Conclusion...
In summary, it's unfortunate that ACCO Brands is generating lower returns from the same amount of capital. Investors haven't taken kindly to these developments, since the stock has declined 31% from where it was five years ago. With underlying trends that aren't great in these areas, we'd consider looking elsewhere.
One more thing: We've identified 2 warning signs with ACCO Brands (at least 1 which is significant) , and understanding these would certainly be useful.
If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.