We Like These Underlying Return On Capital Trends At J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing (ATH:MIN)

What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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 J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing (ATH:MIN) so let's look a bit deeper.

Understanding Return On Capital Employed (ROCE)

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. 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)

0.12 = €1.2m ÷ (€27m - €18m) (Based on the trailing twelve months to June 2023).

Thus, J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing has an ROCE of 12%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Luxury industry average of 15%.

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.

What The Trend Of ROCE Can Tell Us

You'd find it hard not to be impressed with the ROCE trend at J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing. The data shows that returns on capital have increased by 2,547% over the trailing five years. That's a very favorable trend because this means that the company is earning more per dollar of capital that's being employed. In regards to capital employed, J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing appears to been achieving more with less, since the business is using 47% less capital to run its operation. If this trend continues, the business might be getting more efficient but it's shrinking in terms of total assets.

For the record though, there was a noticeable increase in the company's current liabilities over the period, so we would attribute some of the ROCE growth to that. Effectively this means that suppliers or short-term creditors are now funding 65% of the business, which is more than it was five years ago. And with current liabilities at those levels, that's pretty high.

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 been able to turn things around and earn higher returns on lower amounts of capital. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. Therefore, we think it would be worth your time to check if these trends are going to continue.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 4 warning signs for J. & B. Ladenis Bros - Minerva - Knitwear Manufacturing (of which 3 don't sit too well with us!) that you should know about.

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.