Investors Will Want Bittium Oyj's (HEL:BITTI) Growth In ROCE To Persist

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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. Speaking of which, we noticed some great changes in Bittium Oyj's (HEL:BITTI) returns on capital, so let's have a look.

Our free stock report includes 2 warning signs investors should be aware of before investing in Bittium Oyj. Read for free now.

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. Analysts use this formula to calculate it for Bittium Oyj:

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

0.068 = €8.9m ÷ (€165m - €34m) (Based on the trailing twelve months to December 2024).

Therefore, Bittium Oyj has an ROCE of 6.8%. Ultimately, that's a low return and it under-performs the Software industry average of 13%.

See our latest analysis for Bittium Oyj

Above you can see how the current ROCE for Bittium Oyj compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Bittium Oyj for free.

What The Trend Of ROCE Can Tell Us

Bittium Oyj's ROCE growth is quite impressive. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 48% over the last five years. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

The Bottom Line On Bittium Oyj's ROCE

To bring it all together, Bittium Oyj has done well to increase the returns it's generating from its capital employed. Since the stock has returned a solid 65% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

Bittium Oyj does have some risks, we noticed 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

While Bittium Oyj may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.