The Returns At Interpump Group (BIT:IP) Aren't Growing

If you're looking for a multi-bagger, there's a few things to 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. 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.

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. 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)

0.16 = €378m ÷ (€3.1b - €817m) (Based on the trailing twelve months to December 2022).

So, Interpump Group has an ROCE of 16%. In absolute terms, that's a satisfactory return, but compared to the Machinery industry average of 9.2% 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're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

SWOT Analysis for Interpump Group

What Does the ROCE Trend For Interpump Group Tell Us?

While the current returns on capital are decent, they haven't changed much. The company has consistently earned 16% for the last five years, and the capital employed within the business has risen 107% in that time. 16% 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.

What We Can Learn From Interpump Group's ROCE

To sum it up, Interpump Group has simply been reinvesting capital steadily, at those decent rates of return. And the stock has followed suit returning a meaningful 89% to shareholders over the last five years. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

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.

While Interpump Group 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.