Here’s What’s Happening With Returns At UniDevice (ETR:UDC)

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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 looked at UniDevice (ETR:UDC) and its trend of ROCE, we really 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. Analysts use this formula to calculate it for UniDevice:

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

0.17 = €4.7m ÷ (€32m - €3.7m) (Based on the trailing twelve months to September 2020).

So, UniDevice has an ROCE of 17%. On its own, that's a standard return, however it's much better than the 9.0% generated by the Electronic industry.

View our latest analysis for UniDevice

Above you can see how the current ROCE for UniDevice compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

How Are Returns Trending?

The trends we've noticed at UniDevice are quite reassuring. The numbers show that in the last three years, the returns generated on capital employed have grown considerably to 17%. Basically the business is earning more per dollar of capital invested and in addition to that, 44% more capital is being employed now too. So we're very much inspired by what we're seeing at UniDevice thanks to its ability to profitably reinvest capital.

In Conclusion...

In summary, it's great to see that UniDevice can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And with a respectable 57% awarded to those who held the stock over the last three years, you could argue that these developments are starting to get the attention they deserve. In light of that, we think it's worth looking further into this stock because if UniDevice can keep these trends up, it could have a bright future ahead.

On a final note, we've found 2 warning signs for UniDevice that we think you should be aware of.

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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