In This Article:
What are the early trends we should look for to identify a stock that could multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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 Elmos Semiconductor (ETR:ELG) looks great, so lets see what the trend can tell us.
We check all companies for important risks. See what we found for Elmos Semiconductor in our free report.
Understanding 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 Elmos Semiconductor, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.24 = €166m ÷ (€785m - €86m) (Based on the trailing twelve months to March 2025).
Thus, Elmos Semiconductor has an ROCE of 24%. That's a fantastic return and not only that, it outpaces the average of 17% earned by companies in a similar industry.
View our latest analysis for Elmos Semiconductor
In the above chart we have measured Elmos Semiconductor's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Elmos Semiconductor for free.
How Are Returns Trending?
We like the trends that we're seeing from Elmos Semiconductor. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 24%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 77%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.
Our Take On Elmos Semiconductor's ROCE
All in all, it's terrific to see that Elmos Semiconductor is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 260% to shareholders over the last five years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.
Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation for ELG that compares the share price and estimated value.