Nafpaktos Textile Industry (ATH:NAYP) Is Looking To Continue Growing Its Returns On Capital

There are a few key trends to look for if we want to identify the next multi-bagger. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, we've noticed some promising trends at Nafpaktos Textile Industry (ATH:NAYP) so let's look a bit deeper.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Nafpaktos Textile Industry, this is the formula:

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

0.14 = €2.3m ÷ (€21m - €3.9m) (Based on the trailing twelve months to June 2022).

Thus, Nafpaktos Textile Industry has an ROCE of 14%. That's a pretty standard return and it's in line with the industry average of 14%.

View our latest analysis for Nafpaktos Textile Industry

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

What Can We Tell From Nafpaktos Textile Industry's ROCE Trend?

Investors would be pleased with what's happening at Nafpaktos Textile Industry. Over the last five years, returns on capital employed have risen substantially to 14%. Basically the business is earning more per dollar of capital invested and in addition to that, 75% more capital is being employed now too. So we're very much inspired by what we're seeing at Nafpaktos Textile Industry thanks to its ability to profitably reinvest capital.

In Conclusion...

All in all, it's terrific to see that Nafpaktos Textile Industry is reaping the rewards from prior investments and is growing its capital base. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

Nafpaktos Textile Industry does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those doesn't sit too well with us...

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.