Stock Analysis

Under The Bonnet, iEnergizer's (LON:IBPO) Returns Look Impressive

Published
AIM:IBPO
Source: Shutterstock

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at the ROCE trend of iEnergizer (LON:IBPO) we really liked what we saw.

Understanding 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 iEnergizer, this is the formula:

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

0.44 = US$96m ÷ (US$274m - US$55m) (Based on the trailing twelve months to September 2022).

Therefore, iEnergizer has an ROCE of 44%. That's a fantastic return and not only that, it outpaces the average of 10.0% earned by companies in a similar industry.

Check out our latest analysis for iEnergizer

roce
AIM:IBPO Return on Capital Employed December 9th 2022

In the above chart we have measured iEnergizer's 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 iEnergizer.

What Does the ROCE Trend For iEnergizer Tell Us?

iEnergizer is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 44%. 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 35%. So we're very much inspired by what we're seeing at iEnergizer thanks to its ability to profitably reinvest capital.

The Key Takeaway

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what iEnergizer has. Since the stock has returned a staggering 1,447% 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 iEnergizer can keep these trends up, it could have a bright future ahead.

If you want to know some of the risks facing iEnergizer we've found 3 warning signs (1 is potentially serious!) that you should be aware of before investing here.

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.

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

Find out whether iEnergizer 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.

View the Free Analysis