Mulberry Group (LON:MUL) Hasn't Managed To Accelerate Its Returns

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Although, when we looked at Mulberry Group (LON:MUL), it didn't seem to tick all of these boxes.

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

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

0.10 = UK£9.4m ÷ (UK£130m - UK£38m) (Based on the trailing twelve months to October 2022).

Thus, Mulberry Group has an ROCE of 10%. That's a pretty standard return and it's in line with the industry average of 10%.

See our latest analysis for Mulberry Group

Historical performance is a great place to start when researching a stock so above you can see the gauge for Mulberry Group's ROCE against it's prior returns. If you're interested in investigating Mulberry Group's past further, check out this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For Mulberry Group Tell Us?

Over the past five years, Mulberry Group's ROCE and capital employed have both remained mostly flat. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So don't be surprised if Mulberry Group doesn't end up being a multi-bagger in a few years time.

The Bottom Line

We can conclude that in regards to Mulberry Group's returns on capital employed and the trends, there isn't much change to report on. And in the last five years, the stock has given away 65% so the market doesn't look too hopeful on these trends strengthening any time soon. Therefore based on the analysis done in this article, we don't think Mulberry Group has the makings of a multi-bagger.

If you'd like to know more about Mulberry Group, we've spotted 3 warning signs, and 1 of them doesn't sit too well with us.

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.