The Return Trends At Recupero Etico Sostenibile (BIT:RES) Look Promising

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in Recupero Etico Sostenibile's (BIT:RES) returns on capital, so let's have a look.

Understanding Return On Capital Employed (ROCE)

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 Recupero Etico Sostenibile is:

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

0.14 = €6.0m ÷ (€55m - €12m) (Based on the trailing twelve months to June 2024).

Thus, Recupero Etico Sostenibile has an ROCE of 14%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Commercial Services industry average of 12%.

See our latest analysis for Recupero Etico Sostenibile

In the above chart we have measured Recupero Etico Sostenibile's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Recupero Etico Sostenibile .

What Can We Tell From Recupero Etico Sostenibile's ROCE Trend?

Investors would be pleased with what's happening at Recupero Etico Sostenibile. The data shows that returns on capital have increased substantially over the last two years to 14%. Basically the business is earning more per dollar of capital invested and in addition to that, 102% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

Our Take On Recupero Etico Sostenibile's ROCE

To sum it up, Recupero Etico Sostenibile 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 solid 42% to shareholders over the last year, it's fair to say investors are beginning to recognize these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

One more thing to note, we've identified 2 warning signs with Recupero Etico Sostenibile and understanding them should be part of your investment process.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.