Returns At J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing (ATH:MIN) Are On The Way Up

What trends should we look for it we want to identify stocks that can multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing (ATH:MIN) looks quite promising in regards to its trends of return on capital.

What is 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. To calculate this metric for J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing, this is the formula:

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

0.075 = €1.5m ÷ (€27m - €6.4m) (Based on the trailing twelve months to June 2021).

Thus, J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing has an ROCE of 7.5%. On its own that's a low return on capital but it's in line with the industry's average returns of 7.5%.

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

Historical performance is a great place to start when researching a stock so above you can see the gauge for J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing's ROCE against it's prior returns. If you're interested in investigating J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing's past further, check out this free graph of past earnings, revenue and cash flow.

So How Is J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing's ROCE Trending?

The fact that J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing is now generating some pre-tax profits from its prior investments is very encouraging. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 7.5% on its capital. In addition to that, J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing is employing 247% more capital than previously which is expected of a company that's trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

One more thing to note, J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing has decreased current liabilities to 24% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. This tells us that J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing has grown its returns without a reliance on increasing their current liabilities, which we're very happy with.

Our Take On J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing's ROCE

In summary, it's great to see that J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing has managed to break into profitability and is continuing to reinvest in its business. And a remarkable 1,189% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Like most companies, J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing does come with some risks, and we've found 2 warning signs that you should be aware of.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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.

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