J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing's (ATH:MIN) Returns On Capital Are Heading Higher

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, we've noticed some promising trends at J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing (ATH:MIN) so let's look a bit deeper.

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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. The formula for this calculation on J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing is:

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

0.061 = €1.2m ÷ (€28m - €8.3m) (Based on the trailing twelve months to December 2024).

Thus, J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing has an ROCE of 6.1%. In absolute terms, that's a low return and it also under-performs the Luxury industry average of 12%.

Check out our latest analysis for J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing.

How Are Returns Trending?

J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing has not disappointed with their ROCE growth. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 89% over the last five years. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

The Bottom Line On J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing's ROCE

As discussed above, J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. Since the stock has returned a staggering 122% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing can keep these trends up, it could have a bright future ahead.

One more thing: We've identified 3 warning signs with J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing (at least 2 which make us uncomfortable) , and understanding them would certainly be useful.

While J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing 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.