1 day Ago By Simply Wall St.
What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in ( ) returns on capital, so let's have a look.
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Elma Electronic, this is the formula: 0.15 = CHF13m ÷ (CHF120m - CHF38m) .
So, On its own, that's a standard return, however it's much better than the 13% generated by the Electronic industry. Historical performance is a great place to start when researching a stock so above you can see the gauge for Elma Electronic's ROCE against it's prior returns. If you're interested in investigating Elma Electronic's past further, check out this .
Investors would be pleased with what's happening at Elma Electronic. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 15%. 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 29%.
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. 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 Elma Electronic has. And a remarkable 142% total return over the last five years tells us that investors are expecting more good things to come in the future.
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. 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 that compares the share price and estimated value.
While Elma Electronic isn't earning the highest return, check out this.
