What Do The Returns At UniDevice (ETR:UDC) Mean Going Forward?

To find a multi-bagger stock, what are the underlying trends we should look for in a business? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. 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, UniDevice (ETR:UDC) looks quite promising in regards to its trends of return on capital.

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 UniDevice, this is the formula:

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).

Thus, UniDevice has an ROCE of 17%. On its own, that's a standard return, however it's much better than the 8.7% 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.

So How Is UniDevice's ROCE Trending?

UniDevice is displaying some positive trends. The data shows that returns on capital have increased substantially over the last three years 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.

The Bottom Line On UniDevice's ROCE

To sum it up, UniDevice has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with a respectable 63% awarded to those who held the stock over the last year, you could argue that these developments are starting to get the attention they deserve. Therefore, we think it would be worth your time to check if these trends are going to continue.

On a separate note, we've found 2 warning signs for UniDevice you'll probably want to know about.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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