The Return Trends At TREVI - Finanziaria Industriale (BIT:TFIN) Look Promising

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. Speaking of which, we noticed some great changes in TREVI - Finanziaria Industriale's (BIT:TFIN) returns on capital, so let's have a look.

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Return On Capital Employed (ROCE): What Is It?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on TREVI - Finanziaria Industriale is:

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

0.15 = €60m ÷ (€700m - €304m) (Based on the trailing twelve months to June 2025).

So, TREVI - Finanziaria Industriale has an ROCE of 15%. In isolation, that's a pretty standard return but against the Construction industry average of 23%, it's not as good.

See our latest analysis for TREVI - Finanziaria Industriale

In the above chart we have measured TREVI - Finanziaria Industriale's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering TREVI - Finanziaria Industriale for free.

What Does the ROCE Trend For TREVI - Finanziaria Industriale Tell Us?

We're delighted to see that TREVI - Finanziaria Industriale is reaping rewards from its investments and has now broken into profitability. The company was generating losses five years ago, but has managed to turn it around and as we saw earlier is now earning 15%, which is always encouraging. While returns have increased, the amount of capital employed by TREVI - Finanziaria Industriale has remained flat over the period. With no noticeable increase in capital employed, it's worth knowing what the company plans on doing going forward in regards to reinvesting and growing the business. After all, a company can only become a long term multi-bagger if it continually reinvests in itself at high rates of return.

Another thing to note, TREVI - Finanziaria Industriale has a high ratio of current liabilities to total assets of 43%. 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.

What We Can Learn From TREVI - Finanziaria Industriale's ROCE

As discussed above, TREVI - Finanziaria Industriale appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. Given the stock has declined 59% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. So researching this company further and determining whether or not these trends will continue seems justified.

TREVI - Finanziaria Industriale does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those is potentially serious...

While TREVI - Finanziaria Industriale 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.