Capital Investment Trends At mmcité (SEP:MMCTE) Look Strong

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. Ergo, when we looked at the ROCE trends at mmcité (SEP:MMCTE), we liked what we saw.

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What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for mmcité:

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

0.30 = Kč139m ÷ (Kč832m - Kč361m) (Based on the trailing twelve months to December 2023).

Thus, mmcité has an ROCE of 30%. In absolute terms that's a great return and it's even better than the Consumer Durables industry average of 8.6%.

See our latest analysis for mmcité

Historical performance is a great place to start when researching a stock so above you can see the gauge for mmcité's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of mmcité .

What Does the ROCE Trend For mmcité Tell Us?

We'd be pretty happy with returns on capital like mmcité. The company has consistently earned 30% for the last five years, and the capital employed within the business has risen 931% in that time. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. If mmcité can keep this up, we'd be very optimistic about its future.

On a side note, mmcité has done well to reduce current liabilities to 43% of total assets over the last five years. This can eliminate some of the risks inherent in the operations because the business has less outstanding obligations to their suppliers and or short-term creditors than they did previously. We'd like to see this trend continue though because as it stands today, thats still a pretty high level.

The Key Takeaway

In short, we'd argue mmcité has the makings of a multi-bagger since its been able to compound its capital at very profitable rates of return. However, over the last year, the stock has only delivered a 6.9% return to shareholders who held over that period. So because of the trends we're seeing, we'd recommend looking further into this stock to see if it has the makings of a multi-bagger.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 2 warning signs for mmcité (of which 1 is a bit concerning!) that you should know about.

High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.