Bloom Health Partners (CSE:BLMH) Has More To Do To Multiply In Value Going Forward

What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. In light of that, when we looked at Bloom Health Partners (CSE:BLMH) and its ROCE trend, we weren't exactly thrilled.

What is Return On Capital Employed (ROCE)?

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. Analysts use this formula to calculate it for Bloom Health Partners:

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

0.072 = CA$1.6m ÷ (CA$40m - CA$17m) (Based on the trailing twelve months to September 2021).

Therefore, Bloom Health Partners has an ROCE of 7.2%. On its own that's a low return on capital but it's in line with the industry's average returns of 7.0%.

View our latest analysis for Bloom Health Partners

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating Bloom Health Partners' past further, check out this free graph of past earnings, revenue and cash flow.

What Can We Tell From Bloom Health Partners' ROCE Trend?

There hasn't been much to report for Bloom Health Partners' returns and its level of capital employed because both metrics have been steady for the past . Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So unless we see a substantial change at Bloom Health Partners in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

On a separate but related note, it's important to know that Bloom Health Partners has a current liabilities to total assets ratio of 43%, which we'd consider pretty high. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

The Key Takeaway

We can conclude that in regards to Bloom Health Partners' returns on capital employed and the trends, there isn't much change to report on. And in the last year, the stock has given away 53% so the market doesn't look too hopeful on these trends strengthening any time soon. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

If you want to know some of the risks facing Bloom Health Partners we've found 3 warning signs (1 is significant!) that you should be aware of before investing here.

While Bloom Health Partners 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.