Capital Investment Trends At Braime Group (LON:BMT) Look Strong

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. With that in mind, the ROCE of Braime Group (LON:BMT) looks attractive right now, so lets see what the trend of returns can tell us.

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

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. To calculate this metric for Braime Group, this is the formula:

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

0.20 = UK£4.3m ÷ (UK£34m - UK£13m) (Based on the trailing twelve months to December 2022).

So, Braime Group has an ROCE of 20%. That's a fantastic return and not only that, it outpaces the average of 14% earned by companies in a similar industry.

Check out our latest analysis for Braime Group

Historical performance is a great place to start when researching a stock so above you can see the gauge for Braime Group's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Braime Group, check out these free graphs here.

So How Is Braime Group's ROCE Trending?

Braime Group deserves to be commended in regards to it's returns. The company has consistently earned 20% for the last five years, and the capital employed within the business has risen 79% in that time. Returns like this are the envy of most businesses and given it has repeatedly reinvested at these rates, that's even better. If Braime Group can keep this up, we'd be very optimistic about its future.

What We Can Learn From Braime Group's ROCE

Braime Group has demonstrated its proficiency by generating high returns on increasing amounts of capital employed, which we're thrilled about. And given the stock has only risen 11% over the last five years, we'd suspect the market is beginning to recognize these trends. So to determine if Braime Group is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.

One more thing: We've identified 2 warning signs with Braime Group (at least 1 which doesn't sit too well with us) , and understanding them would certainly be useful.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high 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.