Returns On Capital Are Showing Encouraging Signs At K. Kythreotis Holdings (CSE:KYTH)

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Speaking of which, we noticed some great changes in K. Kythreotis Holdings' (CSE:KYTH) returns on capital, so let's have a look.

Return On Capital Employed (ROCE): What Is It?

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. The formula for this calculation on K. Kythreotis Holdings is:

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

0.11 = €2.0m ÷ (€23m - €5.1m) (Based on the trailing twelve months to June 2024).

So, K. Kythreotis Holdings has an ROCE of 11%. In absolute terms, that's a satisfactory return, but compared to the Basic Materials industry average of 7.2% it's much better.

Check out 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'd like to look at how K. Kythreotis Holdings has performed in the past in other metrics, you can view this free graph of K. Kythreotis Holdings' past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

Investors would be pleased with what's happening at K. Kythreotis Holdings. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 11%. The amount of capital employed has increased too, by 48%. So we're very much inspired by what we're seeing at K. Kythreotis Holdings thanks to its ability to profitably reinvest capital.

The Key Takeaway

All in all, it's terrific to see that K. Kythreotis Holdings is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 259% 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 K. Kythreotis Holdings can keep these trends up, it could have a bright future ahead.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 3 warning signs for K. Kythreotis Holdings (of which 1 doesn't sit too well with us!) that you should know about.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.