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There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. That's why when we briefly looked at init innovation in traffic systems' (ETR:IXX) ROCE trend, we were pretty happy with what we saw.
Return On Capital Employed (ROCE): What Is It?
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 init innovation in traffic systems is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.13 = €26m ÷ (€313m - €108m) (Based on the trailing twelve months to December 2024).
Therefore, init innovation in traffic systems has an ROCE of 13%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Software industry average of 15%.
See our latest analysis for init innovation in traffic systems
In the above chart we have measured init innovation in traffic systems' 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 init innovation in traffic systems .
So How Is init innovation in traffic systems' ROCE Trending?
While the current returns on capital are decent, they haven't changed much. Over the past five years, ROCE has remained relatively flat at around 13% and the business has deployed 67% more capital into its operations. 13% is a pretty standard return, and it provides some comfort knowing that init innovation in traffic systems has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.
The Key Takeaway
The main thing to remember is that init innovation in traffic systems has proven its ability to continually reinvest at respectable rates of return. And since the stock has risen strongly over the last five years, it appears the market might expect this trend to continue. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.