Has Sano Bruno's Enterprises (TLV:SANO1) Got What It Takes To Become A Multi-Bagger?

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So, when we ran our eye over Sano Bruno's Enterprises' (TLV:SANO1) trend of ROCE, we liked what we saw.

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. The formula for this calculation on Sano Bruno's Enterprises is:

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

0.19 = ₪278m ÷ (₪1.8b - ₪362m) (Based on the trailing twelve months to September 2020).

Therefore, Sano Bruno's Enterprises has an ROCE of 19%. That's a relatively normal return on capital, and it's around the 16% generated by the Household Products industry.

View our latest analysis for Sano Bruno's Enterprises

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, revenue and cash flow of Sano Bruno's Enterprises, check out these free graphs here.

The Trend Of ROCE

While the current returns on capital are decent, they haven't changed much. The company has employed 61% more capital in the last five years, and the returns on that capital have remained stable at 19%. 19% is a pretty standard return, and it provides some comfort knowing that Sano Bruno's Enterprises has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

What We Can Learn From Sano Bruno's Enterprises' ROCE

The main thing to remember is that Sano Bruno's Enterprises has proven its ability to continually reinvest at respectable rates of return. And long term investors would be thrilled with the 143% return they've received over the last five years. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

If you'd like to know about the risks facing Sano Bruno's Enterprises, we've discovered 1 warning sign that you should be aware of.

While Sano Bruno's Enterprises may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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