If you're looking for a multibagger, there are a few things to keep in mind. Ideally, your business will see two trends.grow first return One is capital employed (ROCE) and the second is increasing. amount of capital employed. After all, this shows that this is a business that is increasing its profitability and reinvesting its profits. With that in mind, the trends we see are: Mr. Fope (BIT:FPE) looks very promising, so let's take a look.
Return on Capital Employed (ROCE): What is it?
For those who have never used ROCE before, it measures the “return” (pre-tax profit) that a company generates from the capital employed in its business. The analyst calculates her Fope using the following formula:
Return on Capital Employed = Earnings before interest and tax (EBIT) ÷ (Total assets – Current liabilities)
0.38 = 16 million euros ÷ (59 million euros – 17 million euros) (Based on the previous 12 months to June 2023).
therefore, Fope's ROCE is 38%. That's an impressive return, and not only that, but it's higher than the average 12% earned by companies in similar industries.
Check out our latest analysis for Fope.
Above we show how Fope's current ROCE compares to its previous return on equity, but the past can only tell us so much. If you want, check out the forecasts from the analysts covering Fope here. free.
What can we learn from Fope's ROCE trend?
Investors will be happy with what's happening with Fope. According to the data, the return on capital has increased significantly to 38% in the past five years. The amount of capital used also increased by 98%. This could indicate that there are plenty of opportunities inside to invest capital at ever-higher interest rates, and this combination is common among multibaggers.
Our take on Fope's ROCE
A company that can generate strong returns on capital and continually reinvest in itself is a highly sought after trait, and Fope has that. And because stocks have performed so well over the past five years, investors are taking these patterns into account. So, given that this stock has proven to have an encouraging trend, it's worth investigating the company further to see if that trend is likely to persist.
Want to know some of the risks facing Fope that we discovered? two warning signs (1 is not very good to us!) Here's what you need to know before investing.
Fope isn't the only stock with strong returns.If you want to know more, check here free A list of companies that achieve high return on equity due to solid fundamentals.
Valuation is complex, but we help make it simple.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
