Capital Investment Trends At EVS Broadcast Equipment (EBR:EVS) Look Strong

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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, when we ran our eye over EVS Broadcast Equipment's (EBR:EVS) trend of ROCE, we really liked what we saw.

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 EVS Broadcast Equipment is:

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

0.20 = €41m ÷ (€252m - €48m) (Based on the trailing twelve months to December 2023).

Therefore, EVS Broadcast Equipment has an ROCE of 20%. That's a fantastic return and not only that, it outpaces the average of 15% earned by companies in a similar industry.

View our latest analysis for EVS Broadcast Equipment

Above you can see how the current ROCE for EVS Broadcast Equipment compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for EVS Broadcast Equipment .

What Does the ROCE Trend For EVS Broadcast Equipment Tell Us?

We'd be pretty happy with returns on capital like EVS Broadcast Equipment. The company has consistently earned 20% for the last five years, and the capital employed within the business has risen 38% in that time. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. If EVS Broadcast Equipment can keep this up, we'd be very optimistic about its future.

The Bottom Line On EVS Broadcast Equipment's ROCE

In summary, we're delighted to see that EVS Broadcast Equipment has been compounding returns by reinvesting at consistently high rates of return, as these are common traits of a multi-bagger. And the stock has followed suit returning a meaningful 62% to shareholders over the last five years. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

If you want to continue researching EVS Broadcast Equipment, you might be interested to know about the 1 warning sign that our analysis has discovered.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

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.