BIO-UV Group (EPA:ALTUV) Is Doing The Right Things To Multiply Its Share Price

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? 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. 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 BIO-UV Group (EPA:ALTUV) so let's look a bit deeper.

Return On Capital Employed (ROCE): What Is It?

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. The formula for this calculation on BIO-UV Group is:

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

0.062 = €3.6m ÷ (€81m - €22m) (Based on the trailing twelve months to June 2022).

So, BIO-UV Group has an ROCE of 6.2%. On its own that's a low return on capital but it's in line with the industry's average returns of 6.2%.

See our latest analysis for BIO-UV Group

In the above chart we have measured BIO-UV Group'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 report on analyst forecasts for the company.

What Does the ROCE Trend For BIO-UV Group Tell Us?

We're glad to see that ROCE is heading in the right direction, even if it is still low at the moment. Over the last five years, returns on capital employed have risen substantially to 6.2%. 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 314%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

Our Take On BIO-UV Group's ROCE

To sum it up, BIO-UV Group has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Given the stock has declined 15% in the last three years, this could be a good investment if the valuation and other metrics are also appealing. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

On a final note, we found 3 warning signs for BIO-UV Group (1 can't be ignored) you should be aware of.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.