The Return Trends At Delfingen Industry (EPA:ALDEL) Look Promising

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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Delfingen Industry (EPA:ALDEL) looks quite promising in regards to its trends of return on capital.

Return On Capital Employed (ROCE): What is it?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Delfingen Industry is:

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

0.17 = €42m ÷ (€329m - €86m) (Based on the trailing twelve months to June 2021).

Therefore, Delfingen Industry has an ROCE of 17%. In absolute terms, that's a satisfactory return, but compared to the Auto Components industry average of 12% it's much better.

See our latest analysis for Delfingen Industry

Historical performance is a great place to start when researching a stock so above you can see the gauge for Delfingen Industry's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Delfingen Industry, check out these free graphs here.

How Are Returns Trending?

We like the trends that we're seeing from Delfingen Industry. Over the last five years, returns on capital employed have risen substantially to 17%. 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 125%. So we're very much inspired by what we're seeing at Delfingen Industry thanks to its ability to profitably reinvest capital.

What We Can Learn From Delfingen Industry's ROCE

In summary, it's great to see that Delfingen Industry can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 96% return over the last five years. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

One more thing: We've identified 3 warning signs with Delfingen Industry (at least 2 which don't sit too well with us) , and understanding them would certainly be useful.

While Delfingen Industry 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.