Shareholders Would Enjoy A Repeat Of N. Varveris-Moda Bagno's (ATH:MODA) Recent Growth In Returns

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. And in light of that, the trends we're seeing at N. Varveris-Moda Bagno's (ATH:MODA) look very promising so lets take a look.

What Is 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 N. Varveris-Moda Bagno is:

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

0.20 = €6.2m ÷ (€47m - €16m) (Based on the trailing twelve months to December 2023).

Therefore, N. Varveris-Moda Bagno has an ROCE of 20%. In absolute terms that's a great return and it's even better than the Specialty Retail industry average of 10%.

Check out our latest analysis for N. Varveris-Moda Bagno

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 N. Varveris-Moda Bagno.

What Does the ROCE Trend For N. Varveris-Moda Bagno Tell Us?

N. Varveris-Moda Bagno is showing promise given that its ROCE is trending up and to the right. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 565% in that same time. 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. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

The Bottom Line

To sum it up, N. Varveris-Moda Bagno is collecting higher returns from the same amount of capital, and that's impressive. And a remarkable 775% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

N. Varveris-Moda Bagno does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those is significant...

High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.

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