Stock Analysis

Return Trends At Interpump Group (BIT:IP) Aren't Appealing

  •  Updated
BIT:IP
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If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of Interpump Group (BIT:IP) looks decent, right now, so lets see what the trend of returns can tell us.

What is 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. To calculate this metric for Interpump Group, this is the formula:

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

0.15 = €315m ÷ (€2.8b - €728m) (Based on the trailing twelve months to March 2022).

So, Interpump Group has an ROCE of 15%. In absolute terms, that's a satisfactory return, but compared to the Machinery industry average of 8.5% it's much better.

See our latest analysis for Interpump Group

roce
BIT:IP Return on Capital Employed July 18th 2022

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're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

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 employed 79% more capital in the last five years, and the returns on that capital have remained stable at 15%. Since 15% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. 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.

In Conclusion...

In the end, Interpump Group has proven its ability to adequately reinvest capital at good rates of return. And the stock has followed suit returning a meaningful 58% to shareholders 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're still interested in Interpump Group it's worth checking out our FREE intrinsic value approximation to see if it's trading at an attractive price in other respects.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

Valuation is complex, but we're helping make it simple.

Find out whether Interpump Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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About BIT:IP

Interpump Group

Interpump Group S.p.A., together with its subsidiaries, engages in the manufacture and marketing of high-pressure piston pumps in Italy, rest of Europe, North America, the Far East, Oceania, and internationally.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation1
Future Growth2
Past Performance2
Financial Health3
Dividends0

Read more about these checks in the individual report sections or in our analysis model.

Mediocre balance sheet with questionable track record.