:be (VIE:BEAG) Might Be Having Difficulty Using Its Capital Effectively

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. In light of that, when we looked at :be (VIE:BEAG) and its ROCE trend, we weren't exactly thrilled.

Return On Capital Employed (ROCE): What Is It?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for :be:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.034 = €2.4m ÷ (€95m - €23m) (Based on the trailing twelve months to December 2023).

So, :be has an ROCE of 3.4%. In absolute terms, that's a low return and it also under-performs the Professional Services industry average of 13%.

Check out our latest analysis for :be

Historical performance is a great place to start when researching a stock so above you can see the gauge for :be's ROCE against it's prior returns. If you'd like to look at how :be has performed in the past in other metrics, you can view this free graph of :be's past earnings, revenue and cash flow.

What Does the ROCE Trend For :be Tell Us?

On the surface, the trend of ROCE at :be doesn't inspire confidence. To be more specific, ROCE has fallen from 11% over the last two years. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. If these investments prove successful, this can bode very well for long term stock performance.

What We Can Learn From :be's ROCE

In summary, despite lower returns in the short term, we're encouraged to see that :be is reinvesting for growth and has higher sales as a result. Despite these promising trends, the stock has collapsed 77% over the last three years, so there could be other factors hurting the company's prospects. Regardless, reinvestment can pay off in the long run, so we think astute investors may want to look further into this stock.

If you want to know some of the risks facing :be we've found 3 warning signs (1 can't be ignored!) that you should be aware of before investing here.

While :be isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.