The Return Trends At C-Com Satellite Systems (CVE:CMI) Look Promising

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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, C-Com Satellite Systems (CVE:CMI) looks quite promising in regards to its trends of return on capital.

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. The formula for this calculation on C-Com Satellite Systems is:

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

0.096 = CA$2.3m ÷ (CA$25m - CA$640k) (Based on the trailing twelve months to May 2021).

So, C-Com Satellite Systems has an ROCE of 9.6%. On its own that's a low return on capital but it's in line with the industry's average returns of 9.6%.

Check out our latest analysis for C-Com Satellite Systems

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 want to delve into the historical earnings, revenue and cash flow of C-Com Satellite Systems, check out these free graphs here.

What The Trend Of ROCE Can Tell Us

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The data shows that returns on capital have increased substantially over the last five years to 9.6%. Basically the business is earning more per dollar of capital invested and in addition to that, 21% more capital is being employed now too. So we're very much inspired by what we're seeing at C-Com Satellite Systems thanks to its ability to profitably reinvest capital.

The Key Takeaway

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what C-Com Satellite Systems has. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

One more thing to note, we've identified 3 warning signs with C-Com Satellite Systems and understanding these should be part of your investment process.

While C-Com Satellite Systems isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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