Does Wienerberger (VIE:WIE) Have The Makings Of A Multi-Bagger?

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So on that note, Wienerberger (VIE:WIE) looks quite promising in regards to its trends of return on capital.

Return On Capital Employed (ROCE): What is it?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for Wienerberger, this is the formula:

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

0.091 = €313m ÷ (€4.4b - €981m) (Based on the trailing twelve months to September 2020).

So, Wienerberger has an ROCE of 9.1%. On its own, that's a low figure but it's around the 8.0% average generated by the Basic Materials industry.

See our latest analysis for Wienerberger

Above you can see how the current ROCE for Wienerberger compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Wienerberger.

So How Is Wienerberger's ROCE Trending?

Wienerberger is showing promise given that its ROCE is trending up and to the right. The figures show that over the last five years, ROCE has grown 99% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

What We Can Learn From Wienerberger's ROCE

As discussed above, Wienerberger appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. And with a respectable 50% 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. In light of that, we think it's worth looking further into this stock because if Wienerberger can keep these trends up, it could have a bright future ahead.

On a separate note, we've found 3 warning signs for Wienerberger you'll probably want to know about.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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