NetApp's ROCE Trend: A Potential Compounding Machine

NetApp (NASDAQ:NTAP) has a ROCE of 23%, exceeding the Tech industry average of 14%. The company's ROCE has remained relatively flat at 23% over the past five years, while deploying 57% more capital into its operations. With high returns and favorable business models, NetApp has the potential to become a compounding machine. However, the company's high current liabilities to total assets ratio may pose risks.

In the latest trading session, NetApp (NTAP) closed at $103.23, marking a +2.11% move from the previous day. This change outpaced the S&P 500's 1.47% gain on the day, indicating strong performance [1]. The company's shares have seen a decrease of 5.74% over the last month, but this decline is not keeping pace with the Computer and Technology sector's gain of 3.41% and the S&P 500's gain of 0.64% [1].

NetApp's return on capital employed (ROCE) stands at 23%, which exceeds the Tech industry average of 14%. Over the past five years, the company's ROCE has remained relatively flat at 23%, while it has deployed 57% more capital into its operations. This high return on capital and favorable business models position NetApp as a potential compounding machine [1].

However, NetApp's high current liabilities to total assets ratio may pose risks. The company's current liabilities to total assets ratio is 0.87, indicating a significant portion of its assets are tied up in short-term obligations. This ratio should be closely monitored by investors, as high current liabilities can impact liquidity and overall financial health [1].

Investors should also take note of any recent adjustments to analyst estimates for NetApp. These adjustments often mirror the shifting dynamics of short-term business patterns. Empirical research indicates that these revisions in estimates have a direct correlation with impending stock price performance [1].

NetApp is currently a Zacks Rank #2 (Buy), with a Forward P/E ratio of 13.08 and a PEG ratio of 1.87. The company's PEG ratio is lower than the industry average of 2.06, indicating that it is undervalued relative to its expected earnings growth rate [1].

NetApp's recent earnings report showed a growth in revenue of 3.8% year-over-year, and the company announced a quarterly dividend of $0.52 per share. The firm has also seen an increase in institutional ownership, with Federated Hermes Inc. lifting its stake by 97.7% in the first quarter [2].

Overall, NetApp's strong performance metrics and favorable business model position it as an attractive investment opportunity. However, investors should closely monitor the company's high current liabilities to total assets ratio and any changes in analyst estimates.

References:
[1] https://finance.yahoo.com/news/netapp-ntap-outpaces-stock-market-215002534.html
[2] https://www.marketbeat.com/instant-alerts/filing-netapp-inc-nasdaqntap-shares-acquired-by-federated-hermes-inc-2025-07-30/