K. Kythreotis Holdings (CSE:KYTH) Might Have The Makings Of A Multi-Bagger

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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. With that in mind, we've noticed some promising trends at K. Kythreotis Holdings (CSE:KYTH) so let's look a bit deeper.

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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 K. Kythreotis Holdings is:

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

0.12 = €2.1m ÷ (€22m - €4.2m) (Based on the trailing twelve months to December 2024).

Therefore, K. Kythreotis Holdings has an ROCE of 12%. On its own, that's a standard return, however it's much better than the 7.0% generated by the Basic Materials industry.

View our latest analysis for K. Kythreotis Holdings

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 K. Kythreotis Holdings.

The Trend Of ROCE

Investors would be pleased with what's happening at K. Kythreotis Holdings. Over the last five years, returns on capital employed have risen substantially to 12%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 50%. 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.

Our Take On K. Kythreotis Holdings' ROCE

To sum it up, K. Kythreotis Holdings has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 513% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if K. Kythreotis Holdings can keep these trends up, it could have a bright future ahead.

If you want to know some of the risks facing K. Kythreotis Holdings we've found 3 warning signs (1 can't be ignored!) that you should be aware of before investing 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.