Returns On Capital At Celebrus Technologies (LON:CLBS) Have Hit The Brakes

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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. That's why when we briefly looked at Celebrus Technologies' (LON:CLBS) ROCE trend, we were pretty happy with what we saw.

Our free stock report includes 1 warning sign investors should be aware of before investing in Celebrus Technologies. Read for free now.

What Is Return On Capital Employed (ROCE)?

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 Celebrus Technologies, this is the formula:

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

0.14 = UK£5.4m ÷ (UK£54m - UK£15m) (Based on the trailing twelve months to September 2024).

Thus, Celebrus Technologies has an ROCE of 14%. That's a pretty standard return and it's in line with the industry average of 14%.

See our latest analysis for Celebrus Technologies

Above you can see how the current ROCE for Celebrus Technologies 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 Celebrus Technologies .

So How Is Celebrus Technologies' ROCE Trending?

While the current returns on capital are decent, they haven't changed much. The company has consistently earned 14% for the last five years, and the capital employed within the business has risen 49% in that time. Since 14% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

Another point to note, we noticed the company has increased current liabilities over the last five years. This is intriguing because if current liabilities hadn't increased to 28% of total assets, this reported ROCE would probably be less than14% because total capital employed would be higher.The 14% ROCE could be even lower if current liabilities weren't 28% of total assets, because the the formula would show a larger base of total capital employed. With that in mind, just be wary if this ratio increases in the future, because if it gets particularly high, this brings with it some new elements of risk.

The Bottom Line On Celebrus Technologies' ROCE

To sum it up, Celebrus Technologies has simply been reinvesting capital steadily, at those decent rates of return. However, over the last five years, the stock has only delivered a 16% return to shareholders who held over that period. So to determine if Celebrus Technologies is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.

On a separate note, we've found 1 warning sign for Celebrus Technologies you'll probably want to know about.

While Celebrus Technologies isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.