Vogiatzoglou Systems' (ATH:VOSYS) Returns Have Hit A Wall

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. So, when we ran our eye over Vogiatzoglou Systems' (ATH:VOSYS) trend of ROCE, we liked what we saw.

What Is 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. To calculate this metric for Vogiatzoglou Systems, this is the formula:

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

0.10 = €2.2m ÷ (€36m - €14m) (Based on the trailing twelve months to June 2024).

Therefore, Vogiatzoglou Systems has an ROCE of 10%. That's a relatively normal return on capital, and it's around the 11% generated by the Trade Distributors industry.

View our latest analysis for Vogiatzoglou Systems

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

What The Trend Of ROCE Can Tell Us

While the returns on capital are good, they haven't moved much. The company has consistently earned 10% for the last five years, and the capital employed within the business has risen 23% in that time. 10% is a pretty standard return, and it provides some comfort knowing that Vogiatzoglou Systems has consistently earned this amount. 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.

Our Take On Vogiatzoglou Systems' ROCE

In the end, Vogiatzoglou Systems has proven its ability to adequately reinvest capital at good rates of return. However, over the last five years, the stock has only delivered a 30% return to shareholders who held over that period. So to determine if Vogiatzoglou Systems is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.

One more thing to note, we've identified 2 warning signs with Vogiatzoglou Systems and understanding them should be part of your investment process.

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.