Investors Shouldn't Overlook Cliq Digital's (ETR:CLIQ) Impressive Returns On Capital

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. And in light of that, the trends we're seeing at Cliq Digital's (ETR:CLIQ) look very promising so lets take a look.

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 Cliq Digital:

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

0.31 = €20m ÷ (€83m - €17m) (Based on the trailing twelve months to June 2021).

So, Cliq Digital has an ROCE of 31%. In absolute terms that's a great return and it's even better than the Software industry average of 12%.

See our latest analysis for Cliq Digital

Above you can see how the current ROCE for Cliq Digital 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 Cliq Digital here for free.

The Trend Of ROCE

We like the trends that we're seeing from Cliq Digital. The data shows that returns on capital have increased substantially over the last five years to 31%. The amount of capital employed has increased too, by 33%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Bottom Line On Cliq Digital'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 Cliq Digital has. Since the stock has returned a staggering 199% to shareholders over the last five years, it looks like investors are recognizing these changes. 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.

Like most companies, Cliq Digital does come with some risks, and we've found 3 warning signs that you should be aware of.

Cliq Digital is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.