D-BOX Technologies (TSE:DBO) Is Experiencing Growth In Returns On Capital

What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. So on that note, D-BOX Technologies (TSE:DBO) looks quite promising in regards to its trends of return on capital.

Return On Capital Employed (ROCE): What Is It?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for D-BOX Technologies, this is the formula:

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

0.088 = CA$1.2m ÷ (CA$21m - CA$6.8m) (Based on the trailing twelve months to March 2024).

Therefore, D-BOX Technologies has an ROCE of 8.8%. In absolute terms, that's a low return and it also under-performs the Consumer Durables industry average of 14%.

View our latest analysis for D-BOX Technologies

Historical performance is a great place to start when researching a stock so above you can see the gauge for D-BOX Technologies' ROCE against it's prior returns. If you're interested in investigating D-BOX Technologies' past further, check out this free graph covering D-BOX Technologies' past earnings, revenue and cash flow.

The Trend Of ROCE

We're delighted to see that D-BOX Technologies is reaping rewards from its investments and has now broken into profitability. Historically the company was generating losses but as we can see from the latest figures referenced above, they're now earning 8.8% on their capital employed. At first glance, it seems the business is getting more proficient at generating returns, because over the same period, the amount of capital employed has reduced by 34%. This could potentially mean that the company is selling some of its assets.

The Bottom Line

In summary, it's great to see that D-BOX Technologies has been able to turn things around and earn higher returns on lower amounts of capital. Given the stock has declined 50% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. With that in mind, we believe the promising trends warrant this stock for further investigation.

If you want to continue researching D-BOX Technologies, you might be interested to know about the 2 warning signs that our analysis has discovered.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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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