A Look Into Bossard Holding's (VTX:BOSN) Impressive Returns On Capital

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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Ergo, when we looked at the ROCE trends at Bossard Holding (VTX:BOSN), we liked what we saw.

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

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. To calculate this metric for Bossard Holding, this is the formula:

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

0.22 = CHF141m ÷ (CHF910m - CHF281m) (Based on the trailing twelve months to December 2022).

Therefore, Bossard Holding has an ROCE of 22%. In absolute terms that's a great return and it's even better than the Trade Distributors industry average of 15%.

Check out our latest analysis for Bossard Holding

Above you can see how the current ROCE for Bossard 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 Bossard Holding here for free.

How Are Returns Trending?

In terms of Bossard Holding's history of ROCE, it's quite impressive. The company has consistently earned 22% for the last five years, and the capital employed within the business has risen 68% in that time. Returns like this are the envy of most businesses and given it has repeatedly reinvested at these rates, that's even better. You'll see this when looking at well operated businesses or favorable business models.

Our Take On Bossard Holding's ROCE

In short, we'd argue Bossard Holding has the makings of a multi-bagger since its been able to compound its capital at very profitable rates of return. In light of this, the stock has only gained 21% over the last five years for shareholders who have owned the stock in this period. That's why it could be worth your time looking into this stock further to discover if it has more traits of a multi-bagger.

Bossard Holding does have some risks, we noticed 3 warning signs (and 2 which are significant) we think you should know about.

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.