Sciuker Frames (BIT:SCK) Is Achieving High Returns On Its Capital

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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Speaking of which, we noticed some great changes in Sciuker Frames' (BIT:SCK) returns on capital, so let's have a look.

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. To calculate this metric for Sciuker Frames, this is the formula:

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

0.39 = €24m ÷ (€108m - €47m) (Based on the trailing twelve months to December 2021).

So, Sciuker Frames has an ROCE of 39%. In absolute terms that's a great return and it's even better than the Building industry average of 7.4%.

Check out our latest analysis for Sciuker Frames

Above you can see how the current ROCE for Sciuker Frames 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 Sciuker Frames here for free.

So How Is Sciuker Frames' ROCE Trending?

The trends we've noticed at Sciuker Frames are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 39%. Basically the business is earning more per dollar of capital invested and in addition to that, 627% more capital is being employed now too. So we're very much inspired by what we're seeing at Sciuker Frames thanks to its ability to profitably reinvest capital.

On a separate but related note, it's important to know that Sciuker Frames has a current liabilities to total assets ratio of 44%, which we'd consider pretty high. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

Our Take On Sciuker Frames' ROCE

To sum it up, Sciuker Frames has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a staggering 920% to shareholders over the last three years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you'd like to know more about Sciuker Frames, we've spotted 2 warning signs, and 1 of them is significant.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets 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.