Investors Met With Slowing Returns on Capital At Interpump Group (BIT:IP)

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. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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. That's why when we briefly looked at Interpump Group's (BIT:IP) ROCE trend, we were pretty happy with 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. Analysts use this formula to calculate it for Interpump Group:

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

0.18 = €431m ÷ (€3.3b - €862m) (Based on the trailing twelve months to June 2023).

Thus, Interpump Group has an ROCE of 18%. In absolute terms, that's a satisfactory return, but compared to the Machinery industry average of 11% it's much better.

View our latest analysis for Interpump Group

Above you can see how the current ROCE for Interpump Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Interpump Group here for free.

What Does the ROCE Trend For Interpump Group Tell Us?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has consistently earned 18% for the last five years, and the capital employed within the business has risen 112% in that time. 18% is a pretty standard return, and it provides some comfort knowing that Interpump Group has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

The Bottom Line

The main thing to remember is that Interpump Group has proven its ability to continually reinvest at respectable rates of return. And the stock has followed suit returning a meaningful 70% to shareholders over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

While Interpump Group doesn't shine too bright in this respect, it's still worth seeing if the company is trading at attractive prices. You can find that out with our FREE intrinsic value estimation on our platform.

While Interpump Group 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.