Admicom Oyj (HEL:ADMCM) Could Become A Multi-Bagger

There are a few key trends to look for if we want to identify the next multi-bagger. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. And in light of that, the trends we're seeing at Admicom Oyj's (HEL:ADMCM) look very promising so lets take a look.

Understanding Return On Capital Employed (ROCE)

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 Admicom Oyj:

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

0.42 = €9.5m ÷ (€26m - €3.8m) (Based on the trailing twelve months to December 2020).

So, Admicom Oyj has an ROCE of 42%. That's a fantastic return and not only that, it outpaces the average of 12% earned by companies in a similar industry.

Check out our latest analysis for Admicom Oyj

In the above chart we have measured Admicom Oyj'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 Admicom Oyj.

What Can We Tell From Admicom Oyj's ROCE Trend?

We like the trends that we're seeing from Admicom Oyj. Over the last five years, returns on capital employed have risen substantially to 42%. 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 893%. So we're very much inspired by what we're seeing at Admicom Oyj thanks to its ability to profitably reinvest capital.

On a related note, the company's ratio of current liabilities to total assets has decreased to 15%, which basically reduces it's funding from the likes of short-term creditors or suppliers. This tells us that Admicom Oyj has grown its returns without a reliance on increasing their current liabilities, which we're very happy with.

In Conclusion...

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Admicom Oyj has. And with the stock having performed exceptionally well over the last three years, these patterns are being accounted for by investors. Therefore, we think it would be worth your time to check if these trends are going to continue.

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation on our platform that is definitely worth checking out.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

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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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