Domiki Kritis (ATH:DOMIK) Might Have The Makings Of A Multi-Bagger

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, Domiki Kritis (ATH:DOMIK) looks quite promising in regards to its trends of return on capital.

Understanding Return On Capital Employed (ROCE)

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 Domiki Kritis:

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

0.11 = €2.0m ÷ (€22m - €4.4m) (Based on the trailing twelve months to December 2021).

So, Domiki Kritis has an ROCE of 11%. That's a relatively normal return on capital, and it's around the 9.5% generated by the Construction industry.

View our latest analysis for Domiki Kritis

Historical performance is a great place to start when researching a stock so above you can see the gauge for Domiki Kritis' ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Domiki Kritis, check out these free graphs here.

So How Is Domiki Kritis' ROCE Trending?

Investors would be pleased with what's happening at Domiki Kritis. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 11%. The amount of capital employed has increased too, by 20%. So we're very much inspired by what we're seeing at Domiki Kritis thanks to its ability to profitably reinvest capital.

In another part of our analysis, we noticed that the company's ratio of current liabilities to total assets decreased to 20%, which broadly means the business is relying less on its suppliers or short-term creditors to fund its operations. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance.

The Bottom Line

All in all, it's terrific to see that Domiki Kritis is reaping the rewards from prior investments and is growing its capital base. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

One final note, you should learn about the 3 warning signs we've spotted with Domiki Kritis (including 2 which make us uncomfortable) .

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.