ANY Biztonsági Nyomda Nyrt (BUSE:ANY) May Have Issues Allocating Its Capital

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. However, after investigating ANY Biztonsági Nyomda Nyrt (BUSE:ANY), we don't think it's current trends fit the mold of a multi-bagger.

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. To calculate this metric for ANY Biztonsági Nyomda Nyrt, this is the formula:

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

0.064 = Ft883m ÷ (Ft23b - Ft9.2b) (Based on the trailing twelve months to December 2020).

Thus, ANY Biztonsági Nyomda Nyrt has an ROCE of 6.4%. In absolute terms, that's a low return and it also under-performs the Commercial Services industry average of 9.5%.

See our latest analysis for ANY Biztonsági Nyomda Nyrt

In the above chart we have measured ANY Biztonsági Nyomda Nyrt's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

So How Is ANY Biztonsági Nyomda Nyrt's ROCE Trending?

When we looked at the ROCE trend at ANY Biztonsági Nyomda Nyrt, we didn't gain much confidence. Around five years ago the returns on capital were 18%, but since then they've fallen to 6.4%. Given the business is employing more capital while revenue has slipped, this is a bit concerning. If this were to continue, you might be looking at a company that is trying to reinvest for growth but is actually losing market share since sales haven't increased.

In Conclusion...

In summary, we're somewhat concerned by ANY Biztonsági Nyomda Nyrt's diminishing returns on increasing amounts of capital. However the stock has delivered a 54% return to shareholders over the last five years, so investors might be expecting the trends to turn around. Regardless, we don't feel too comfortable with the fundamentals so we'd be steering clear of this stock for now.

On a final note, we found 5 warning signs for ANY Biztonsági Nyomda Nyrt (2 don't sit too well with us) you should be aware of.

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This article by Simply Wall St is general in nature. 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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