Billboard AD (BUL:BBRD) Shareholders Will Want The ROCE Trajectory To Continue

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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. So on that note, Billboard AD (BUL:BBRD) looks quite promising in regards to its trends of return on capital.

Understanding 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. The formula for this calculation on Billboard AD is:

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

0.064 = лв2.0m ÷ (лв42m - лв9.9m) (Based on the trailing twelve months to June 2021).

Thus, Billboard AD has an ROCE of 6.4%. In absolute terms, that's a low return and it also under-performs the Media industry average of 11%.

Check out our latest analysis for Billboard AD

Historical performance is a great place to start when researching a stock so above you can see the gauge for Billboard AD's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Billboard AD, check out these free graphs here.

What Can We Tell From Billboard AD's ROCE Trend?

We're pretty happy with how the ROCE has been trending at Billboard AD. We found that the returns on capital employed over the last five years have risen by 9,718%. That's not bad because this tells for every dollar invested (capital employed), the company is increasing the amount earned from that dollar. In regards to capital employed, Billboard AD appears to been achieving more with less, since the business is using 23% less capital to run its operation. Billboard AD 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...

From what we've seen above, Billboard AD has managed to increase it's returns on capital all the while reducing it's capital base. Given the stock has declined 40% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

Like most companies, Billboard AD does come with some risks, and we've found 3 warning signs that you should be aware of.

While Billboard AD may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.
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