MasterCraft Boat Holdings (NASDAQ:MCFT) Will Want To Turn Around Its Return Trends
MasterCraft Boat Holdings (NASDAQ:MCFT) is facing challenges with its return on capital employed (ROCE), currently at 5.8%, below the industry average of 8.7%. Over the past five years, ROCE has declined from 20%, indicating potential issues with reinvestment and market share. Long-term shareholders have seen a 12% depreciation in their investment, raising concerns about the company's future performance. Analysts suggest that unless trends improve, investors may want to consider other options.
If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. However, after briefly looking over the numbers, we don't think MasterCraft Boat Holdings (NASDAQ:MCFT) has the makings of a multi-bagger going forward, but let's have a look at why that may be.
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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 MasterCraft Boat Holdings, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.058 = US$11m ÷ (US$260m - US$65m) (Based on the trailing twelve months to June 2025).
Thus, MasterCraft Boat Holdings has an ROCE of 5.8%. Ultimately, that's a low return and it under-performs the Leisure industry average of 8.7%.
View our latest analysis for MasterCraft Boat Holdings
Above you can see how the current ROCE for MasterCraft Boat 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 MasterCraft Boat Holdings for free.
The Trend Of ROCE
In terms of MasterCraft Boat Holdings' historical ROCE movements, the trend isn't fantastic. Over the last five years, returns on capital have decreased to 5.8% from 20% five years ago. Given the business is employing more capital while revenue has slipped, this is a bit concerning. If this were to continue, you might be looking at a company that is trying to reinvest for growth but is actually losing market share since sales haven't increased.
The Bottom Line
In summary, we're somewhat concerned by MasterCraft Boat Holdings' diminishing returns on increasing amounts of capital. Long term shareholders who've owned the stock over the last five years have experienced a 12% depreciation in their investment, so it appears the market might not like these trends either. That being the case, unless the underlying trends revert to a more positive trajectory, we'd consider looking elsewhere.
One more thing to note, we've identified 1 warning sign with MasterCraft Boat Holdings and understanding it should be part of your investment process.
While MasterCraft Boat Holdings may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.
