M.T.I Wireless Edge (LON:MWE) Has Some Way To Go To Become A Multi-Bagger

If you're looking for a multi-bagger, there's a few things to keep an eye out for. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of M.T.I Wireless Edge (LON:MWE) looks decent, right now, so lets see what the trend of returns can tell us.

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

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for M.T.I Wireless Edge:

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

0.15 = US$4.8m ÷ (US$44m - US$13m) (Based on the trailing twelve months to June 2025).

So, M.T.I Wireless Edge has an ROCE of 15%. In absolute terms, that's a satisfactory return, but compared to the Communications industry average of 6.5% it's much better.

View our latest analysis for M.T.I Wireless Edge

In the above chart we have measured M.T.I Wireless Edge's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for M.T.I Wireless Edge .

So How Is M.T.I Wireless Edge's ROCE Trending?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. Over the past five years, ROCE has remained relatively flat at around 15% and the business has deployed 28% more capital into its operations. Since 15% 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.

The Bottom Line

To sum it up, M.T.I Wireless Edge has simply been reinvesting capital steadily, at those decent rates of return. And given the stock has only risen 5.9% over the last five years, we'd suspect the market is beginning to recognize these trends. So because of the trends we're seeing, we'd recommend looking further into this stock to see if it has the makings of a multi-bagger.

One more thing to note, we've identified 2 warning signs with M.T.I Wireless Edge and understanding them should be part of your investment process.

While M.T.I Wireless Edge may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.