Officina Stellare (BIT:OS) Is Doing The Right Things To Multiply Its Share Price

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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 on that note, Officina Stellare (BIT:OS) looks quite promising in regards to its trends of return on capital.

What Is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Officina Stellare, this is the formula:

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

0.068 = €1.5m ÷ (€28m - €5.5m) (Based on the trailing twelve months to December 2021).

Thus, Officina Stellare has an ROCE of 6.8%. On its own, that's a low figure but it's around the 8.2% average generated by the Aerospace & Defense industry.

View our latest analysis for Officina Stellare

Above you can see how the current ROCE for Officina Stellare 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 Officina Stellare here for free.

How Are Returns Trending?

We're glad to see that ROCE is heading in the right direction, even if it is still low at the moment. The numbers show that in the last four years, the returns generated on capital employed have grown considerably to 6.8%. 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 1,365%. So we're very much inspired by what we're seeing at Officina Stellare thanks to its ability to profitably reinvest capital.

On a related note, the company's ratio of current liabilities to total assets has decreased to 20%, which basically reduces it's funding from the likes of short-term creditors or suppliers. So this improvement in ROCE has come from the business' underlying economics, which is great to see.

In Conclusion...

In summary, it's great to see that Officina Stellare can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And with a respectable 39% awarded to those who held the stock over the last three years, you could argue that these developments are starting to get the attention they deserve. In light of that, we think it's worth looking further into this stock because if Officina Stellare can keep these trends up, it could have a bright future ahead.

On a final note, we found 2 warning signs for Officina Stellare (1 is significant) you should be aware of.

While Officina Stellare 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.