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

If you're looking for a multi-bagger, there's a few things to keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Domiki Kritis' (ATH:DOMIK) returns on capital, so let's have a look.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its 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)

0.083 = €1.5m ÷ (€23m - €4.4m) (Based on the trailing twelve months to June 2022).

Thus, Domiki Kritis has an ROCE of 8.3%. Even though it's in line with the industry average of 8.3%, it's still a low return by itself.

See 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'd like to look at how Domiki Kritis has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

SWOT Analysis for Domiki Kritis

So How Is Domiki Kritis' ROCE Trending?

We're delighted to see that Domiki Kritis is reaping rewards from its investments and is now generating some pre-tax profits. About five years ago the company was generating losses but things have turned around because it's now earning 8.3% on its capital. In addition to that, Domiki Kritis is employing 23% more capital than previously which is expected of a company that's trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

On a related note, the company's ratio of current liabilities to total assets has decreased to 19%, which basically reduces it's funding from the likes of short-term creditors or suppliers. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance.

The Bottom Line

To the delight of most shareholders, Domiki Kritis has now broken into profitability. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. Therefore, we think it would be worth your time to check if these trends are going to continue.

On a final note, we found 5 warning signs for Domiki Kritis (1 makes us a bit uncomfortable) you should be aware of.

While Domiki Kritis 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.