What Can The Trends At Billboard AD (BUL:BBRD) Tell Us About Their Returns?

If you're looking for a multi-bagger, there's a few things to keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. 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)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed 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)

0.044 = лв1.4m ÷ (лв41m - лв9.7m) (Based on the trailing twelve months to December 2020).

Therefore, Billboard AD has an ROCE of 4.4%. Ultimately, that's a low return and it under-performs the Media industry average of 8.8%.

See 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 of past earnings, revenue and cash flow.

The Trend Of ROCE

It's nice to see that ROCE is headed in the right direction, even if it is still relatively low. We found that the returns on capital employed over the last five years have risen by 741%. The company is now earning лв0.04 per dollar of capital employed. Speaking of capital employed, the company is actually utilizing 21% less than it was five years ago, which can be indicative of a business that's improving its efficiency. 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.

What We Can Learn From Billboard AD's ROCE

In the end, Billboard AD has proven it's capital allocation skills are good with those higher returns from less amount of capital. And since the stock has fallen 51% over the last five years, there might be an opportunity here. With that in mind, we believe the promising trends warrant this stock for further investigation.

Billboard AD does have some risks, we noticed 3 warning signs (and 2 which are significant) we think you should know about.

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. 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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