There's Been No Shortage Of Growth Recently For Nurminen Logistics Oyj's (HEL:NLG1V) Returns On Capital

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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 Nurminen Logistics Oyj (HEL:NLG1V) so let's look a bit deeper.

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 Nurminen Logistics Oyj:

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

0.16 = €9.6m ÷ (€82m - €21m) (Based on the trailing twelve months to December 2021).

So, Nurminen Logistics Oyj has an ROCE of 16%. That's a relatively normal return on capital, and it's around the 14% generated by the Logistics industry.

Check out our latest analysis for Nurminen Logistics Oyj

Above you can see how the current ROCE for Nurminen Logistics Oyj 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 report for Nurminen Logistics Oyj.

How Are Returns Trending?

The fact that Nurminen Logistics Oyj is now generating some pre-tax profits from its prior investments is very encouraging. The company was generating losses five years ago, but now it's earning 16% which is a sight for sore eyes. Not only that, but the company is utilizing 105% more capital than before, but that's to be expected from a company trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

Our Take On Nurminen Logistics Oyj's ROCE

To the delight of most shareholders, Nurminen Logistics Oyj has now broken into profitability. Since the stock has returned a solid 84% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. In light of that, we think it's worth looking further into this stock because if Nurminen Logistics Oyj can keep these trends up, it could have a bright future ahead.

On a separate note, we've found 4 warning signs for Nurminen Logistics Oyj you'll probably want to know about.

While Nurminen Logistics 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.