Returns On Capital Are Showing Encouraging Signs At Belysse Group (EBR:BELYS)

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. So when we looked at Belysse Group (EBR:BELYS) and its trend of ROCE, we really liked what we saw.

What Is Return On Capital Employed (ROCE)?

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. To calculate this metric for Belysse Group, this is the formula:

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

0.091 = €23m ÷ (€322m - €69m) (Based on the trailing twelve months to June 2024).

Thus, Belysse Group has an ROCE of 9.1%. On its own that's a low return on capital but it's in line with the industry's average returns of 9.1%.

View our latest analysis for Belysse Group

In the above chart we have measured Belysse Group's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Belysse Group .

How Are Returns Trending?

You'd find it hard not to be impressed with the ROCE trend at Belysse Group. We found that the returns on capital employed over the last five years have risen by 40%. The company is now earning €0.09 per dollar of capital employed. Interestingly, the business may be becoming more efficient because it's applying 59% less capital than it was five years ago. Belysse Group may be selling some assets so it's worth investigating if the business has plans for future investments to increase returns further still.

In Conclusion...

In the end, Belysse Group has proven it's capital allocation skills are good with those higher returns from less amount of capital. And since the stock has dived 76% over the last five years, there may be other factors affecting the company's prospects. In any case, we believe the economic trends of this company are positive and looking into the stock further could prove rewarding.

If you'd like to know more about Belysse Group, we've spotted 4 warning signs, and 3 of them are significant.

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.

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.