Leptos Calypso Hotels (CSE:LCH) Might Have The Makings Of A Multi-Bagger

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Speaking of which, we noticed some great changes in Leptos Calypso Hotels' (CSE:LCH) returns on capital, so let's have a look.

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Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Leptos Calypso Hotels:

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

0.043 = €5.9m ÷ (€160m - €22m) (Based on the trailing twelve months to June 2025).

So, Leptos Calypso Hotels has an ROCE of 4.3%. In absolute terms, that's a low return and it also under-performs the Hospitality industry average of 6.0%.

See our latest analysis for Leptos Calypso Hotels

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Leptos Calypso Hotels.

How Are Returns Trending?

While there are companies with higher returns on capital out there, we still find the trend at Leptos Calypso Hotels promising. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 2,064% over the last five years. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

Our Take On Leptos Calypso Hotels' ROCE

To bring it all together, Leptos Calypso Hotels has done well to increase the returns it's generating from its capital employed. Since the stock has returned a staggering 182% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Leptos Calypso Hotels can keep these trends up, it could have a bright future ahead.

Leptos Calypso Hotels does have some risks, we noticed 3 warning signs (and 2 which can't be ignored) we think you should know about.

While Leptos Calypso Hotels may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.