Returns At Huber+Suhner (VTX:HUBN) Are On The Way Up

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, 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 Huber+Suhner (VTX:HUBN) and its trend of ROCE, we really liked what we saw.

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

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. Analysts use this formula to calculate it for Huber+Suhner:

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

0.16 = CHF103m ÷ (CHF815m - CHF179m) (Based on the trailing twelve months to December 2022).

Thus, Huber+Suhner has an ROCE of 16%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Electrical industry average of 19%.

Check out our latest analysis for Huber+Suhner

In the above chart we have measured Huber+Suhner's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Huber+Suhner here for free.

The Trend Of ROCE

Huber+Suhner is showing promise given that its ROCE is trending up and to the right. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 88% over the last five years. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

What We Can Learn From Huber+Suhner's ROCE

In summary, we're delighted to see that Huber+Suhner has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And with a respectable 41% 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. In light of that, we think it's worth looking further into this stock because if Huber+Suhner can keep these trends up, it could have a bright future ahead.

If you want to continue researching Huber+Suhner, you might be interested to know about the 1 warning sign that our analysis has discovered.

While Huber+Suhner may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list 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.