Returns Are Gaining Momentum At Zoomd Technologies (CVE:ZOMD)

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at Zoomd Technologies (CVE:ZOMD) so let's look a bit deeper.

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 Zoomd Technologies, this is the formula:

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

0.091 = US$1.6m ÷ (US$26m - US$8.0m) (Based on the trailing twelve months to September 2022).

Therefore, Zoomd Technologies has an ROCE of 9.1%. On its own that's a low return on capital but it's in line with the industry's average returns of 8.7%.

See our latest analysis for Zoomd Technologies

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

How Are Returns Trending?

Zoomd Technologies has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses four years ago, but now it's earning 9.1% which is a sight for sore eyes. Not only that, but the company is utilizing 34% more capital than before, but that's to be expected from a company trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

Our Take On Zoomd Technologies' ROCE

Long story short, we're delighted to see that Zoomd Technologies' reinvestment activities have paid off and the company is now profitable. Given the stock has declined 53% in the last three years, this could be a good investment if the valuation and other metrics are also appealing. So researching this company further and determining whether or not these trends will continue seems justified.

On a separate note, we've found 3 warning signs for Zoomd Technologies you'll probably want to know about.

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.