Mitie Group (LON:MTO) Is Doing The Right Things To Multiply Its Share Price

What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. So when we looked at Mitie Group (LON:MTO) and its trend of ROCE, we really liked what we saw.

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What Is 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. To calculate this metric for Mitie Group, this is the formula:

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

0.16 = UK£203m ÷ (UK£2.6b - UK£1.3b) (Based on the trailing twelve months to September 2025).

Therefore, Mitie Group has an ROCE of 16%. On its own, that's a standard return, however it's much better than the 9.4% generated by the Commercial Services industry.

View our latest analysis for Mitie Group

Above you can see how the current ROCE for Mitie Group 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 Mitie Group .

What Can We Tell From Mitie Group's ROCE Trend?

The trends we've noticed at Mitie Group are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 16%. The amount of capital employed has increased too, by 112%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

On a side note, Mitie Group's current liabilities are still rather high at 52% of total assets. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

Our Take On Mitie Group's ROCE

To sum it up, Mitie Group has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a staggering 361% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Mitie Group can keep these trends up, it could have a bright future ahead.

On a final note, we've found 3 warning signs for Mitie Group that we think you should be aware of.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.