Industrie De Nora (BIT:DNR) Might Have The Makings Of A Multi-Bagger

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. 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 Industrie De Nora (BIT:DNR) and its trend of ROCE, we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Industrie De Nora is:

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

0.16 = €146m ÷ (€1.1b - €226m) (Based on the trailing twelve months to March 2023).

Therefore, Industrie De Nora has an ROCE of 16%. On its own, that's a standard return, however it's much better than the 8.0% generated by the Machinery industry.

View our latest analysis for Industrie De Nora

Above you can see how the current ROCE for Industrie De Nora 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 report for Industrie De Nora.

So How Is Industrie De Nora's ROCE Trending?

The trends we've noticed at Industrie De Nora are quite reassuring. The data shows that returns on capital have increased substantially over the last four years to 16%. 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 46%. So we're very much inspired by what we're seeing at Industrie De Nora thanks to its ability to profitably reinvest capital.

The Bottom Line On Industrie De Nora's ROCE

All in all, it's terrific to see that Industrie De Nora is reaping the rewards from prior investments and is growing its capital base. And with a respectable 58% awarded to those who held the stock over the last year, you could argue that these developments are starting to get the attention they deserve. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation that compares the share price and estimated value.

While Industrie De Nora 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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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.