If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. 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, we’ve noticed some promising trends at J. & B. Ladenis Bros – Minerva – Knitwear Manufacturing (ATH:MIN) so let’s look a bit deeper.
Return On Capital Employed (ROCE): What is it?
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. Analysts use this formula to calculate it for J. & B. Ladenis Bros – Minerva – Knitwear Manufacturing:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)
0.088 = €1.8m ÷ (€26m – €6.0m) (Based on the trailing twelve months to December 2021).
So, J. & B. Ladenis Bros – Minerva – Knitwear Manufacturing has an ROCE of 8.8%. In absolute terms, that’s a low return but it’s around the Luxury industry average of 8.0%.
See our latest analysis for J. & B. Ladenis Bros – Minerva – Knitwear Manufacturing
While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you’re interested in investigating J. & B. Ladenis Bros – Minerva – Knitwear Manufacturing’s past further, check out this free graph of past earnings, revenue and cash flow.
The Trend Of ROCE
We’re glad to see that ROCE is heading in the right direction, even if it is still low at the moment. Over the last five years, returns on capital employed have risen substantially to 8.8%. 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 230%. This can indicate that there’s plenty of opportunities to invest capital internally and at ever higher rates, a combination that’s common among multi-baggers.
One more thing to note, J. & B. Ladenis Bros – Minerva – Knitwear Manufacturing has decreased current liabilities to 23% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance.
The Bottom Line
A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that’s what J. & B. Ladenis Bros – Minerva – Knitwear Manufacturing has. And with a respectable 46% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. So given the stock has proven it has promising trends, it’s worth researching the company further to see if these trends are likely to persist.
Like most companies, J. & B. Ladenis Bros – Minerva – Knitwear Manufacturing does come with some risks, and we’ve found 2 warning signs that you should be aware of.
While J. & B. Ladenis Bros – Minerva – Knitwear Manufacturing isn’t earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.