We Like BELIMO Holding's (VTX:BEAN) Returns And Here's How They're Trending

There are a few key trends to look for if we want to identify the next multi-bagger. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at the ROCE trend of BELIMO Holding (VTX:BEAN) we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for BELIMO Holding:

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

0.30 = CHF146m ÷ (CHF620m - CHF135m) (Based on the trailing twelve months to June 2022).

So, BELIMO Holding has an ROCE of 30%. In absolute terms that's a very respectable return and compared to the Building industry average of 27% it's pretty much on par.

Check out our latest analysis for BELIMO Holding

Above you can see how the current ROCE for BELIMO Holding compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering BELIMO Holding here for free.

How Are Returns Trending?

We like the trends that we're seeing from BELIMO Holding. The data shows that returns on capital have increased substantially over the last five years to 30%. The amount of capital employed has increased too, by 26%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

What We Can Learn From BELIMO Holding's ROCE

In summary, it's great to see that BELIMO Holding can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if BELIMO Holding can keep these trends up, it could have a bright future ahead.

BELIMO Holding does have some risks though, and we've spotted 1 warning sign for BELIMO Holding that you might be interested in.

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.