Stock Analysis

The Return Trends At Big Technologies (LON:BIG) Look Promising

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AIM:BIG
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If you're looking for a multi-bagger, there's a few things to keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. Speaking of which, we noticed some great changes in Big Technologies' (LON:BIG) returns on capital, so let's have a look.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Big Technologies, this is the formula:

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

0.15 = UK£13m ÷ (UK£98m - UK£9.0m) (Based on the trailing twelve months to June 2022).

So, Big Technologies has an ROCE of 15%. In absolute terms, that's a satisfactory return, but compared to the Commercial Services industry average of 8.3% it's much better.

Check out our latest analysis for Big Technologies

roce
AIM:BIG Return on Capital Employed September 30th 2022

In the above chart we have measured Big Technologies' prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Big Technologies.

So How Is Big Technologies' ROCE Trending?

Investors would be pleased with what's happening at Big Technologies. The data shows that returns on capital have increased substantially over the last three years 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 235%. 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 Big Technologies' ROCE

All in all, it's terrific to see that Big Technologies is reaping the rewards from prior investments and is growing its capital base. Astute investors may have an opportunity here because the stock has declined 23% in the last year. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

If you'd like to know about the risks facing Big Technologies, we've discovered 1 warning sign that you should be aware of.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

Valuation is complex, but we're helping make it simple.

Find out whether Big Technologies is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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