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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. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at Waberer's International Nyrt (BST:3WB) and its trend of ROCE, we really liked what we saw.
Understanding Return On Capital Employed (ROCE)
For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Waberer's International Nyrt:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.052 = €26m ÷ (€695m - €200m) (Based on the trailing twelve months to March 2024).
So, Waberer's International Nyrt has an ROCE of 5.2%. Ultimately, that's a low return and it under-performs the Transportation industry average of 6.6%.
See our latest analysis for Waberer's International Nyrt
Historical performance is a great place to start when researching a stock so above you can see the gauge for Waberer's International Nyrt's ROCE against it's prior returns. If you'd like to look at how Waberer's International Nyrt has performed in the past in other metrics, you can view this free graph of Waberer's International Nyrt's past earnings, revenue and cash flow.
How Are Returns Trending?
Shareholders will be relieved that Waberer's International Nyrt has broken into profitability. The company now earns 5.2% on its capital, because five years ago it was incurring losses. Interestingly, the capital employed by the business has remained relatively flat, so these higher returns are either from prior investments paying off or increased efficiencies. With no noticeable increase in capital employed, it's worth knowing what the company plans on doing going forward in regards to reinvesting and growing the business. Because in the end, a business can only get so efficient.
The Key Takeaway
To bring it all together, Waberer's International Nyrt has done well to increase the returns it's generating from its capital employed. Since the stock has returned a staggering 182% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.