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

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. And in light of that, the trends we're seeing at Comet Holding's (VTX:COTN) look very promising so lets take a look.

Return On Capital Employed (ROCE): What is it?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Comet Holding is:

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

0.23 = CHF84m ÷ (CHF490m - CHF126m) (Based on the trailing twelve months to December 2021).

So, Comet Holding has an ROCE of 23%. In absolute terms that's a great return and it's even better than the Electronic industry average of 15%.

View our latest analysis for Comet Holding

Above you can see how the current ROCE for Comet Holding compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Comet Holding.

The Trend Of ROCE

We like the trends that we're seeing from Comet Holding. Over the last five years, returns on capital employed have risen substantially to 23%. The amount of capital employed has increased too, by 44%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line

To sum it up, Comet Holding has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 66% return over the last five years. In light of that, we think it's worth looking further into this stock because if Comet Holding can keep these trends up, it could have a bright future ahead.

On a separate note, we've found 1 warning sign for Comet Holding you'll probably want to know about.

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.