Stock Analysis

Returns On Capital At Clever Global (BME:CLE) Paint An Interesting Picture

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BME:CLE
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If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after briefly looking over the numbers, we don't think Clever Global (BME:CLE) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Clever Global is:

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

0.02 = €232k ÷ (€16m - €4.5m) (Based on the trailing twelve months to June 2020).

So, Clever Global has an ROCE of 2.0%. Ultimately, that's a low return and it under-performs the IT industry average of 12%.

See our latest analysis for Clever Global

roce
BME:CLE Return on Capital Employed November 26th 2020

Historical performance is a great place to start when researching a stock so above you can see the gauge for Clever Global's ROCE against it's prior returns. If you're interested in investigating Clever Global's past further, check out this free graph of past earnings, revenue and cash flow.

What Can We Tell From Clever Global's ROCE Trend?

Unfortunately, the trend isn't great with ROCE falling from 19% five years ago, while capital employed has grown 154%. Usually this isn't ideal, but given Clever Global conducted a capital raising before their most recent earnings announcement, that would've likely contributed, at least partially, to the increased capital employed figure. It's unlikely that all of the funds raised have been put to work yet, so as a consequence Clever Global might not have received a full period of earnings contribution from it.

In Conclusion...

From the above analysis, we find it rather worrisome that returns on capital and sales for Clever Global have fallen, meanwhile the business is employing more capital than it was five years ago. Investors haven't taken kindly to these developments, since the stock has declined 67% from where it was three years ago. With underlying trends that aren't great in these areas, we'd consider looking elsewhere.

On a separate note, we've found 3 warning signs for Clever Global you'll probably want to know about.

While Clever Global 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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About BME:CLE

Clever Global

Clever Global, S.A. provides technology and smart sourcing services worldwide.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation2
Future Growth0
Past Performance0
Financial Health0
Dividends0

Read more about these checks in the individual report sections or in our analysis model.

Slightly overvalued with weak fundamentals.