We Like These Underlying Trends At EnviTec Biogas (ETR:ETG)

If you're looking for a multi-bagger, there's a few things to 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. With that in mind, we've noticed some promising trends at EnviTec Biogas (ETR:ETG) so let's look a bit deeper.

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. Analysts use this formula to calculate it for EnviTec Biogas:

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

0.084 = €16m ÷ (€249m - €53m) (Based on the trailing twelve months to June 2020).

Thus, EnviTec Biogas has an ROCE of 8.4%. In absolute terms, that's a low return, but it's much better than the Oil and Gas industry average of 6.7%.

Check out our latest analysis for EnviTec Biogas

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 EnviTec Biogas has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

So How Is EnviTec Biogas' ROCE Trending?

EnviTec Biogas is showing promise given that its ROCE is trending up and to the right. 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 575% 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. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

What We Can Learn From EnviTec Biogas' ROCE

In summary, we're delighted to see that EnviTec Biogas has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Since the stock has returned a staggering 439% 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 EnviTec Biogas can keep these trends up, it could have a bright future ahead.

One more thing, we've spotted 3 warning signs facing EnviTec Biogas that you might find interesting.

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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