Danieli & C. Officine Meccaniche (BIT:DAN) Is Doing The Right Things To Multiply Its Share Price

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, 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 on that note, Danieli & C. Officine Meccaniche (BIT:DAN) looks quite promising in regards to its trends of return on capital.

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Understanding Return On Capital Employed (ROCE)

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 Danieli & C. Officine Meccaniche is:

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

0.089 = €303m ÷ (€7.9b - €4.5b) (Based on the trailing twelve months to June 2025).

Thus, Danieli & C. Officine Meccaniche has an ROCE of 8.9%. On its own that's a low return on capital but it's in line with the industry's average returns of 8.6%.

Check out our latest analysis for Danieli & C. Officine Meccaniche

In the above chart we have measured Danieli & C. Officine Meccaniche's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Danieli & C. Officine Meccaniche for free.

So How Is Danieli & C. Officine Meccaniche's ROCE Trending?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The data shows that returns on capital have increased substantially over the last five years to 8.9%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 52%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

Another thing to note, Danieli & C. Officine Meccaniche has a high ratio of current liabilities to total assets of 57%. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

What We Can Learn From Danieli & C. Officine Meccaniche's ROCE

To sum it up, Danieli & C. Officine Meccaniche has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 223% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Danieli & C. Officine Meccaniche does have some risks though, and we've spotted 1 warning sign for Danieli & C. Officine Meccaniche that you might be interested in.

While Danieli & C. Officine Meccaniche isn't earning the highest return, check out this free list of companies that are 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.