Capital Investment Trends At BIEM.L.FDLKK GarmentLtd (SZSE:002832) Look Strong

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. That's why when we briefly looked at BIEM.L.FDLKK GarmentLtd's (SZSE:002832) ROCE trend, we were very happy with what we saw.

What Is 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. The formula for this calculation on BIEM.L.FDLKK GarmentLtd is:

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

0.20 = CN¥966m ÷ (CN¥6.1b - CN¥1.2b) (Based on the trailing twelve months to September 2023).

Thus, BIEM.L.FDLKK GarmentLtd has an ROCE of 20%. In absolute terms that's a great return and it's even better than the Luxury industry average of 5.1%.

View our latest analysis for BIEM.L.FDLKK GarmentLtd

In the above chart we have measured BIEM.L.FDLKK GarmentLtd's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for BIEM.L.FDLKK GarmentLtd .

What Does the ROCE Trend For BIEM.L.FDLKK GarmentLtd Tell Us?

In terms of BIEM.L.FDLKK GarmentLtd's history of ROCE, it's quite impressive. The company has consistently earned 20% for the last five years, and the capital employed within the business has risen 218% 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. If BIEM.L.FDLKK GarmentLtd can keep this up, we'd be very optimistic about its future.

The Key Takeaway

In summary, we're delighted to see that BIEM.L.FDLKK GarmentLtd has been compounding returns by reinvesting at consistently high rates of return, as these are common traits of a multi-bagger. On top of that, the stock has rewarded shareholders with a remarkable 133% return to those who've held over the last five years. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 2 warning signs for BIEM.L.FDLKK GarmentLtd (of which 1 makes us a bit uncomfortable!) that you should 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.