Returns On Capital At BIEM.L.FDLKK GarmentLtd (SZSE:002832) Have Stalled

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. That's why when we briefly looked at BIEM.L.FDLKK GarmentLtd's (SZSE:002832) ROCE trend, we were pretty 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)

0.19 = CN¥1.0b ÷ (CN¥7.1b - CN¥1.6b) (Based on the trailing twelve months to March 2024).

Therefore, BIEM.L.FDLKK GarmentLtd has an ROCE of 19%. On its own, that's a standard return, however it's much better than the 6.5% generated by the Luxury industry.

See 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 .

So How Is BIEM.L.FDLKK GarmentLtd's ROCE Trending?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has consistently earned 19% for the last five years, and the capital employed within the business has risen 220% in that time. 19% is a pretty standard return, and it provides some comfort knowing that BIEM.L.FDLKK GarmentLtd has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

The Bottom Line

To sum it up, BIEM.L.FDLKK GarmentLtd has simply been reinvesting capital steadily, at those decent rates of return. And the stock has followed suit returning a meaningful 45% to shareholders over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

If you want to know some of the risks facing BIEM.L.FDLKK GarmentLtd we've found 2 warning signs (1 doesn't sit too well with us!) that you should be aware of before investing here.

While BIEM.L.FDLKK GarmentLtd isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com