VERBIO Vereinigte BioEnergie (ETR:VBK) Is Achieving High Returns On Its Capital

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in VERBIO Vereinigte BioEnergie's (ETR:VBK) 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. To calculate this metric for VERBIO Vereinigte BioEnergie, this is the formula:

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

0.39 = €365m ÷ (€1.2b - €268m) (Based on the trailing twelve months to March 2023).

Thus, VERBIO Vereinigte BioEnergie has an ROCE of 39%. In absolute terms that's a great return and it's even better than the Oil and Gas industry average of 28%.

Check out our latest analysis for VERBIO Vereinigte BioEnergie

Above you can see how the current ROCE for VERBIO Vereinigte BioEnergie compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering VERBIO Vereinigte BioEnergie here for free.

SWOT Analysis for VERBIO Vereinigte BioEnergie

So How Is VERBIO Vereinigte BioEnergie's ROCE Trending?

The trends we've noticed at VERBIO Vereinigte BioEnergie are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 39%. Basically the business is earning more per dollar of capital invested and in addition to that, 211% 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.

Our Take On VERBIO Vereinigte BioEnergie's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what VERBIO Vereinigte BioEnergie has. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

One more thing to note, we've identified 1 warning sign with VERBIO Vereinigte BioEnergie and understanding this should be part of your investment process.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets 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.