Returns At BELIMO Holding (VTX:BEAN) Appear To Be Weighed Down

If you're looking for a multi-bagger, there's a few things to keep an eye out for. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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. Looking at BELIMO Holding (VTX:BEAN), it does have a high ROCE right now, but lets see how returns are trending.

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

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. The formula for this calculation on BELIMO Holding is:

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

0.30 = CHF161m ÷ (CHF679m - CHF146m) (Based on the trailing twelve months to June 2024).

So, BELIMO Holding has an ROCE of 30%. In absolute terms that's a great return and it's even better than the Building industry average of 16%.

Check out our latest analysis for BELIMO Holding

In the above chart we have measured BELIMO Holding's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for BELIMO Holding .

What Does the ROCE Trend For BELIMO Holding Tell Us?

There hasn't been much to report for BELIMO Holding's returns and its level of capital employed because both metrics have been steady for the past five years. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. So it may not be a multi-bagger in the making, but given the decent 30% return on capital, it'd be difficult to find fault with the business's current operations. That probably explains why BELIMO Holding has been paying out 76% of its earnings as dividends to shareholders. These mature businesses typically have reliable earnings and not many places to reinvest them, so the next best option is to put the earnings into shareholders pockets.

The Bottom Line On BELIMO Holding's ROCE

In summary, BELIMO Holding isn't compounding its earnings but is generating decent returns on the same amount of capital employed. Investors must think there's better things to come because the stock has knocked it out of the park, delivering a 112% gain to shareholders who have held over the last five years. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.

On a separate note, we've found 1 warning sign for BELIMO Holding you'll probably want to know about.

BELIMO Holding is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.