Should You Invest In WestBond Enterprises (CVE:WBE)?

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at the ROCE trend of WestBond Enterprises (CVE:WBE) we really liked what we saw.

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. Analysts use this formula to calculate it for WestBond Enterprises:

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

0.26 = CA$3.6m ÷ (CA$16m - CA$2.6m) (Based on the trailing twelve months to December 2020).

Thus, WestBond Enterprises has an ROCE of 26%. That's a fantastic return and not only that, it outpaces the average of 17% earned by companies in a similar industry.

See our latest analysis for WestBond Enterprises

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

The Trend Of ROCE

WestBond Enterprises is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 26%. Basically the business is earning more per dollar of capital invested and in addition to that, 34% more capital is being employed now too. So we're very much inspired by what we're seeing at WestBond Enterprises thanks to its ability to profitably reinvest capital.

In Conclusion...

All in all, it's terrific to see that WestBond Enterprises is reaping the rewards from prior investments and is growing its capital base. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you want to continue researching WestBond Enterprises, you might be interested to know about the 3 warning signs that our analysis has discovered.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity.

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