Returns On Capital Are A Standout For STIF Société anonyme (EPA:ALSTI)

There are a few key trends to look for if we want to identify the next multi-bagger. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in STIF Société anonyme's (EPA:ALSTI) returns on capital, so let's have a look.

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 STIF Société anonyme is:

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

0.24 = €7.2m ÷ (€36m - €6.6m) (Based on the trailing twelve months to June 2024).

Thus, STIF Société anonyme has an ROCE of 24%. In absolute terms that's a great return and it's even better than the Machinery industry average of 9.3%.

View our latest analysis for STIF Société anonyme

In the above chart we have measured STIF Société anonyme's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for STIF Société anonyme .

How Are Returns Trending?

We like the trends that we're seeing from STIF Société anonyme. Over the last one year, returns on capital employed have risen substantially to 24%. The amount of capital employed has increased too, by 53%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Bottom Line On STIF Société anonyme's ROCE

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 STIF Société anonyme has. And with the stock having performed exceptionally well over the last year, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if STIF Société anonyme can keep these trends up, it could have a bright future ahead.

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation for ALSTI 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. 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.