Many Would Be Envious Of Straumann Holding's (VTX:STMN) Excellent Returns On Capital

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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So, when we ran our eye over Straumann Holding's (VTX:STMN) trend of ROCE, we really liked what we saw.

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Understanding Return On Capital Employed (ROCE)

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

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

0.23 = CHF625m ÷ (CHF3.6b - CHF943m) (Based on the trailing twelve months to December 2024).

Therefore, Straumann Holding has an ROCE of 23%. That's a fantastic return and not only that, it outpaces the average of 15% earned by companies in a similar industry.

See our latest analysis for Straumann Holding

In the above chart we have measured Straumann 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 analyst report for Straumann Holding .

The Trend Of ROCE

It's hard not to be impressed by Straumann Holding's returns on capital. The company has consistently earned 23% for the last five years, and the capital employed within the business has risen 48% in that time. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. If Straumann Holding can keep this up, we'd be very optimistic about its future.

The Key Takeaway

Straumann Holding has demonstrated its proficiency by generating high returns on increasing amounts of capital employed, which we're thrilled about. However, over the last five years, the stock has only delivered a 13% return to shareholders who held over that period. So to determine if Straumann Holding is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.

Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation for STMN that compares the share price and estimated value.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity.

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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.