Mytilineos (ATH:MYTIL) Is Doing The Right Things To Multiply Its Share Price

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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 Mytilineos (ATH:MYTIL) so let's look a bit deeper.

Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Mytilineos:

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

0.18 = €868m ÷ (€7.0b - €2.2b) (Based on the trailing twelve months to June 2023).

So, Mytilineos has an ROCE of 18%. In absolute terms, that's a satisfactory return, but compared to the Industrials industry average of 7.0% it's much better.

View our latest analysis for Mytilineos

In the above chart we have measured Mytilineos' 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 Mytilineos.

The Trend Of ROCE

Mytilineos is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 18%. Basically the business is earning more per dollar of capital invested and in addition to that, 104% more capital is being employed now too. So we're very much inspired by what we're seeing at Mytilineos thanks to its ability to profitably reinvest capital.

The Bottom Line On Mytilineos' ROCE

All in all, it's terrific to see that Mytilineos is reaping the rewards from prior investments and is growing its capital base. And a remarkable 448% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

Mytilineos does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those is a bit concerning...

While Mytilineos 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.