We Like These Underlying Return On Capital Trends At HAEMATO (ETR:HAEK)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So on that note, HAEMATO (ETR:HAEK) looks quite promising in regards to its trends of return on capital.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for HAEMATO, this is the formula:

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

0.057 = €8.3m ÷ (€172m - €26m) (Based on the trailing twelve months to June 2022).

Therefore, HAEMATO has an ROCE of 5.7%. On its own that's a low return on capital but it's in line with the industry's average returns of 5.9%.

See our latest analysis for HAEMATO

In the above chart we have measured HAEMATO's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for HAEMATO.

SWOT Analysis for HAEMATO

What Can We Tell From HAEMATO's ROCE Trend?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 5.7%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 60%. So we're very much inspired by what we're seeing at HAEMATO thanks to its ability to profitably reinvest capital.

What We Can Learn From HAEMATO'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 HAEMATO has. Given the stock has declined 61% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

HAEMATO does have some risks though, and we've spotted 3 warning signs for HAEMATO that you might be interested in.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.