Returns Are Gaining Momentum At Metlen Energy & Metals (ATH:MYTIL)

If you're looking for a multi-bagger, there's a few things to 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, we've noticed some promising trends at Metlen Energy & Metals (ATH:MYTIL) so let's look a bit deeper.

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

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 Metlen Energy & Metals:

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

0.16 = €902m ÷ (€8.9b - €3.3b) (Based on the trailing twelve months to June 2024).

So, Metlen Energy & Metals has an ROCE of 16%. In absolute terms, that's a satisfactory return, but compared to the Industrials industry average of 7.4% it's much better.

See our latest analysis for Metlen Energy & Metals

Above you can see how the current ROCE for Metlen Energy & Metals compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Metlen Energy & Metals for free.

The Trend Of ROCE

Metlen Energy & Metals is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 16%. The amount of capital employed has increased too, by 119%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

Our Take On Metlen Energy & Metals' ROCE

All in all, it's terrific to see that Metlen Energy & Metals 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. In light of that, we think it's worth looking further into this stock because if Metlen Energy & Metals can keep these trends up, it could have a bright future ahead.

If you want to know some of the risks facing Metlen Energy & Metals we've found 3 warning signs (2 are a bit unpleasant!) that you should be aware of before investing here.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.