Returns Are Gaining Momentum At Aktieselskabet Schouw (CPH:SCHO)

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. With that in mind, we've noticed some promising trends at Aktieselskabet Schouw (CPH:SCHO) so let's look a bit deeper.

Return On Capital Employed (ROCE): What Is It?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for Aktieselskabet Schouw, this is the formula:

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

0.11 = kr.1.9b ÷ (kr.29b - kr.11b) (Based on the trailing twelve months to September 2024).

So, Aktieselskabet Schouw has an ROCE of 11%. That's a pretty standard return and it's in line with the industry average of 11%.

See our latest analysis for Aktieselskabet Schouw

Above you can see how the current ROCE for Aktieselskabet Schouw compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Aktieselskabet Schouw .

So How Is Aktieselskabet Schouw's ROCE Trending?

The trends we've noticed at Aktieselskabet Schouw are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 11%. 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 29%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line On Aktieselskabet Schouw's ROCE

All in all, it's terrific to see that Aktieselskabet Schouw is reaping the rewards from prior investments and is growing its capital base. Since the stock has only returned 6.9% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. So with that in mind, we think the stock deserves further research.

Like most companies, Aktieselskabet Schouw does come with some risks, and we've found 1 warning sign that you should be aware of.

While Aktieselskabet Schouw 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. 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.