Why The 30% Return On Capital At BELIMO Holding (VTX:BEAN) Should Have Your Attention

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. Speaking of which, we noticed some great changes in BELIMO Holding's (VTX:BEAN) returns on capital, so let's have a look.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its 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%. That's a fantastic return and not only that, it outpaces the average of 24% earned by companies in a similar industry.

See 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're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

So How Is BELIMO Holding's ROCE Trending?

BELIMO Holding is displaying some positive trends. 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%. So we're very much inspired by what we're seeing at BELIMO Holding thanks to its ability to profitably reinvest capital.

The Bottom Line

All in all, it's terrific to see that BELIMO Holding is reaping the rewards from prior investments and is growing its capital base. And with a respectable 97% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

On a final note, we've found 1 warning sign for BELIMO Holding that we think you should be aware of.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

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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.