The Return Trends At EL. D. Mouzakis (ATH:MOYZK) Look Promising

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. So on that note, EL. D. Mouzakis (ATH:MOYZK) looks quite promising in regards to its trends of return on capital.

Return On Capital Employed (ROCE): What Is It?

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 EL. D. Mouzakis, this is the formula:

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

0.0033 = €185k ÷ (€58m - €1.4m) (Based on the trailing twelve months to June 2022).

So, EL. D. Mouzakis has an ROCE of 0.3%. Ultimately, that's a low return and it under-performs the Luxury industry average of 14%.

View our latest analysis for EL. D. Mouzakis

Historical performance is a great place to start when researching a stock so above you can see the gauge for EL. D. Mouzakis' ROCE against it's prior returns. If you're interested in investigating EL. D. Mouzakis' past further, check out this free graph of past earnings, revenue and cash flow.

The Trend Of ROCE

We're delighted to see that EL. D. Mouzakis is reaping rewards from its investments and has now broken into profitability. While the business was unprofitable in the past, it's now turned things around and is earning 0.3% on its capital. While returns have increased, the amount of capital employed by EL. D. Mouzakis has remained flat over the period. So while we're happy that the business is more efficient, just keep in mind that could mean that going forward the business is lacking areas to invest internally for growth. So if you're looking for high growth, you'll want to see a business's capital employed also increasing.

What We Can Learn From EL. D. Mouzakis' ROCE

To sum it up, EL. D. Mouzakis is collecting higher returns from the same amount of capital, and that's impressive. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 91% return over the last five years. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

EL. D. Mouzakis does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable...

While EL. D. Mouzakis 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.