We Like These Underlying Return On Capital Trends At K. Kythreotis Holdings (CSE:KYTH)

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding 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.

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What Is 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 K. Kythreotis Holdings:

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 7.4% it's much better.

See our latest analysis for K. Kythreotis Holdings

Historical performance is a great place to start when researching a stock so above you can see the gauge for K. Kythreotis Holdings' ROCE against it's prior returns. 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.

The Trend Of ROCE

Investors would be pleased with what's happening at K. Kythreotis Holdings. The data shows that returns on capital have increased substantially over the last five years to 11%. Basically the business is earning more per dollar of capital invested and in addition to that, 48% more capital is being employed now too. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Bottom Line

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 231% 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.

One more thing: We've identified 3 warning signs with K. Kythreotis Holdings (at least 1 which is a bit unpleasant) , and understanding them would certainly be useful.

While K. Kythreotis Holdings 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.