Investors Will Want OPUS GLOBAL Nyrt's (BUSE:OPUS) Growth In ROCE To Persist

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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, we've noticed some promising trends at OPUS GLOBAL Nyrt (BUSE:OPUS) 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. Analysts use this formula to calculate it for OPUS GLOBAL Nyrt:

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

0.035 = Ft24b ÷ (Ft886b - Ft196b) (Based on the trailing twelve months to March 2022).

Thus, OPUS GLOBAL Nyrt has an ROCE of 3.5%. In absolute terms, that's a low return and it also under-performs the Industrials industry average of 7.3%.

See our latest analysis for OPUS GLOBAL Nyrt

Historical performance is a great place to start when researching a stock so above you can see the gauge for OPUS GLOBAL Nyrt's ROCE against it's prior returns. If you'd like to look at how OPUS GLOBAL Nyrt has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

How Are Returns Trending?

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. Over the last five years, returns on capital employed have risen substantially to 3.5%. Basically the business is earning more per dollar of capital invested and in addition to that, 2,141% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

Our Take On OPUS GLOBAL Nyrt's ROCE

To sum it up, OPUS GLOBAL Nyrt has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And since the stock has fallen 45% over the last five years, there might be an opportunity here. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

OPUS GLOBAL Nyrt does have some risks, we noticed 2 warning signs (and 1 which is a bit concerning) we think you should know about.

While OPUS GLOBAL Nyrt isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.