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. Ergo, when we looked at the ROCE trends at Planisware SAS (EPA:PLNW), we liked what we saw.
Understanding Return On Capital Employed (ROCE)
For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Planisware SAS:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.24 = €52m ÷ (€301m - €89m) (Based on the trailing twelve months to December 2024).
Thus, Planisware SAS has an ROCE of 24%. In absolute terms that's a great return and it's even better than the Software industry average of 11%.
Check out our latest analysis for Planisware SAS
Above you can see how the current ROCE for Planisware SAS compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Planisware SAS .
The Trend Of ROCE
In terms of Planisware SAS' history of ROCE, it's quite impressive. The company has consistently earned 24% for the last four years, and the capital employed within the business has risen 121% in that time. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. If Planisware SAS can keep this up, we'd be very optimistic about its future.
Our Take On Planisware SAS' ROCE
In the end, the company has proven it can reinvest it's capital at high rates of returns, which you'll remember is a trait of a multi-bagger. However, over the last year, the stock hasn't provided much growth to shareholders in the way of total returns. For that reason, savvy investors might want to look further into this company in case it's a prime investment.
Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation for PLNW that compares the share price and estimated value.
Planisware SAS is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.
Valuation is complex, but we're here to simplify it.
Discover if Planisware SAS might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
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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.