Returns At BIO-UV Group (EPA:ALTUV) Are On The Way Up

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. 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?

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. To calculate this metric for BIO-UV Group, this is the formula:

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

0.032 = €1.4m ÷ (€52m - €7.5m) (Based on the trailing twelve months to December 2020).

So, BIO-UV Group has an ROCE of 3.2%. Even though it's in line with the industry average of 3.2%, it's still a low return by itself.

Check out our latest analysis for BIO-UV Group

Above you can see how the current ROCE for BIO-UV Group 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 BIO-UV Group here for free.

What The Trend Of ROCE Can Tell Us

BIO-UV Group has recently broken into profitability so their prior investments seem to be paying off. About four years ago the company was generating losses but things have turned around because it's now earning 3.2% on its capital. In addition to that, BIO-UV Group is employing 238% more capital than previously which is expected of a company that's trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

Our Take On BIO-UV Group's ROCE

Long story short, we're delighted to see that BIO-UV Group's reinvestment activities have paid off and the company is now profitable. And given the stock has remained rather flat over the last year, there might be an opportunity here if other metrics are strong. So researching this company further and determining whether or not these trends will continue seems justified.

One more thing to note, we've identified 3 warning signs with BIO-UV Group and understanding these should be part of your investment process.

While BIO-UV Group isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

If you’re looking to trade BIO-UV Group, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.