Essbio (SNSE:ESSBIO-C) Shareholders Will Want The ROCE Trajectory To Continue

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. With that in mind, we've noticed some promising trends at Essbio (SNSE:ESSBIO-C) so let's look a bit deeper.

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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 Essbio is:

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

0.071 = CL$75b ÷ (CL$1.1t - CL$68b) (Based on the trailing twelve months to September 2025).

So, Essbio has an ROCE of 7.1%. In absolute terms, that's a low return and it also under-performs the Water Utilities industry average of 8.9%.

See our latest analysis for Essbio

Historical performance is a great place to start when researching a stock so above you can see the gauge for Essbio's ROCE against it's prior returns. If you're interested in investigating Essbio's past further, check out this free graph covering Essbio's past earnings, revenue and cash flow.

What Can We Tell From Essbio's ROCE Trend?

We're glad to see that ROCE is heading in the right direction, even if it is still low at the moment. The data shows that returns on capital have increased substantially over the last five years to 7.1%. Basically the business is earning more per dollar of capital invested and in addition to that, 23% more capital is being employed now too. So we're very much inspired by what we're seeing at Essbio thanks to its ability to profitably reinvest capital.

The Key Takeaway

All in all, it's terrific to see that Essbio is reaping the rewards from prior investments and is growing its capital base. Considering the stock has delivered 11% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

Essbio does come with some risks though, we found 3 warning signs in our investment analysis, and 2 of those shouldn't be ignored...

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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.