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

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. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, 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. Speaking of which, we noticed some great changes in Billboard AD's (BUL:BBRD) returns on capital, so let's have a look.

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. To calculate this metric for Billboard AD, this is the formula:

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

0.077 = лв2.5m ÷ (лв43m - лв10m) (Based on the trailing twelve months to March 2024).

Thus, Billboard AD has an ROCE of 7.7%. On its own, that's a low figure but it's around the 9.4% average generated by the Media industry.

View 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're interested in investigating Billboard AD's past further, check out this free graph covering Billboard AD's past earnings, revenue and cash flow.

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

Billboard AD is showing promise given that its ROCE is trending up and to the right. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 78% in that same time. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

The Bottom Line On Billboard AD's ROCE

To bring it all together, Billboard AD has done well to increase the returns it's generating from its capital employed. Since the stock has returned a solid 72% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. 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'd like to know more about Billboard AD, we've spotted 3 warning signs, and 2 of them make us uncomfortable.

While Billboard AD isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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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