The Returns At Basler (ETR:BSL) Provide Us With Signs Of What's To Come

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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, when we ran our eye over Basler's (ETR:BSL) trend of ROCE, we liked what we saw.

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. The formula for this calculation on Basler is:

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

0.14 = €22m ÷ (€184m - €29m) (Based on the trailing twelve months to September 2020).

Thus, Basler has an ROCE of 14%. In absolute terms, that's a satisfactory return, but compared to the Electronic industry average of 8.7% it's much better.

See our latest analysis for Basler

In the above chart we have measured Basler'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 Basler.

What Does the ROCE Trend For Basler Tell Us?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has employed 133% more capital in the last five years, and the returns on that capital have remained stable at 14%. 14% is a pretty standard return, and it provides some comfort knowing that Basler has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

The Bottom Line On Basler's ROCE

In the end, Basler has proven its ability to adequately reinvest capital at good rates of return. And long term investors would be thrilled with the 447% return they've received over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

If you're still interested in Basler it's worth checking out our FREE intrinsic value approximation to see if it's trading at an attractive price in other respects.

While Basler isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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This article by Simply Wall St is general in nature. 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.
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