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華爾街日報Pediatrix Medical Group (NYSE:MD) Is Doing The Right Things To Multiply Its Share Price
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. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So on that note, Pediatrix Medical Group (NYSE:MD) looks quite promising in regards to its trends of return on capital.
What Is Return On Capital Employed (ROCE)?
For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Pediatrix Medical Group is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.13 = US$235m ÷ (US$2.2b - US$393m) (Based on the trailing twelve months to September 2025).
Thus, Pediatrix Medical Group has an ROCE of 13%. That's a relatively normal return on capital, and it's around the 11% generated by the Healthcare industry.
View our latest analysis for Pediatrix Medical Group
In the above chart we have measured Pediatrix Medical Group's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Pediatrix Medical Group .
What The Trend Of ROCE Can Tell Us
We're pretty happy with how the ROCE has been trending at Pediatrix Medical Group. The figures show that over the last five years, returns on capital have grown by 95%. The company is now earning US$0.1 per dollar of capital employed. In regards to capital employed, Pediatrix Medical Group appears to been achieving more with less, since the business is using 38% less capital to run its operation. Pediatrix Medical Group may be selling some assets so it's worth investigating if the business has plans for future investments to increase returns further still.
What We Can Learn From Pediatrix Medical Group's ROCE
In the end, Pediatrix Medical Group has proven it's capital allocation skills are good with those higher returns from less amount of capital. And given the stock has remained rather flat over the last five years, there might be an opportunity here if other metrics are strong. With that in mind, we believe the promising trends warrant this stock for further investigation.
Pediatrix Medical Group does have some risks though, and we've spotted 1 warning sign for Pediatrix Medical Group that you might be interested in.
While Pediatrix Medical Group isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
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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.