Manitou BF (EPA:MTU) Is Looking To Continue Growing Its Returns On Capital

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Manitou BF (EPA:MTU) looks quite promising in regards to its trends of return on capital.

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. To calculate this metric for Manitou BF, this is the formula:

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

0.15 = €138m ÷ (€1.4b - €481m) (Based on the trailing twelve months to June 2021).

Therefore, Manitou BF has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 3.9% generated by the Machinery industry.

See our latest analysis for Manitou BF

Above you can see how the current ROCE for Manitou BF 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 Manitou BF.

What The Trend Of ROCE Can Tell Us

The trends we've noticed at Manitou BF are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 15%. 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 44%. So we're very much inspired by what we're seeing at Manitou BF thanks to its ability to profitably reinvest capital.

The Key Takeaway

All in all, it's terrific to see that Manitou BF is reaping the rewards from prior investments and is growing its capital base. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if Manitou BF can keep these trends up, it could have a bright future ahead.

On a final note, we've found 1 warning sign for Manitou BF that we think you should be aware of.

While Manitou BF 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.
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