Will the Promising Trends At Moury Construct (EBR:MOUR) Continue?

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Speaking of which, we noticed some great changes in Moury Construct's (EBR:MOUR) returns on capital, so let's have a look.

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. The formula for this calculation on Moury Construct is:

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

0.13 = €8.5m ÷ (€117m - €51m) (Based on the trailing twelve months to June 2020).

Thus, Moury Construct has an ROCE of 13%. In absolute terms, that's a satisfactory return, but compared to the Construction industry average of 10% it's much better.

See our latest analysis for Moury Construct

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 want to delve into the historical earnings, revenue and cash flow of Moury Construct, check out these free graphs here.

What Does the ROCE Trend For Moury Construct Tell Us?

Moury Construct is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 13%. The amount of capital employed has increased too, by 30%. So we're very much inspired by what we're seeing at Moury Construct thanks to its ability to profitably reinvest capital.

Another thing to note, Moury Construct has a high ratio of current liabilities to total assets of 43%. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

The Bottom Line

To sum it up, Moury Construct has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with a respectable 89% 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.

If you want to continue researching Moury Construct, you might be interested to know about the 3 warning signs that our analysis has discovered.

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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This article by Simply Wall St is general in nature. 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.
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