Returns Are Gaining Momentum At CIR. - Compagnie Industriali Riunite (BIT:CIR)

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at CIR. - Compagnie Industriali Riunite (BIT:CIR) and its trend of ROCE, we really liked what we saw.

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Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for CIR. - Compagnie Industriali Riunite, this is the formula:

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

0.046 = €98m ÷ (€2.8b - €606m) (Based on the trailing twelve months to December 2024).

Therefore, CIR. - Compagnie Industriali Riunite has an ROCE of 4.6%. In absolute terms, that's a low return and it also under-performs the Auto Components industry average of 9.4%.

View our latest analysis for CIR. - Compagnie Industriali Riunite

Above you can see how the current ROCE for CIR. - Compagnie Industriali Riunite compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for CIR. - Compagnie Industriali Riunite .

So How Is CIR. - Compagnie Industriali Riunite's ROCE Trending?

While the ROCE is still rather low for CIR. - Compagnie Industriali Riunite, we're glad to see it heading in the right direction. We found that the returns on capital employed over the last five years have risen by 49%. The company is now earning €0.05 per dollar of capital employed. Interestingly, the business may be becoming more efficient because it's applying 26% less capital than it was five years ago. If this trend continues, the business might be getting more efficient but it's shrinking in terms of total assets.

The Bottom Line On CIR. - Compagnie Industriali Riunite's ROCE

In a nutshell, we're pleased to see that CIR. - Compagnie Industriali Riunite has been able to generate higher returns from less capital. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 76% return over the last five years. In light of that, we think it's worth looking further into this stock because if CIR. - Compagnie Industriali Riunite can keep these trends up, it could have a bright future ahead.

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation for CIR on our platform that is definitely worth checking out.

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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.