The Return Trends At Gefran (BIT:GE) Look Promising

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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, Gefran (BIT:GE) 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. Analysts use this formula to calculate it for Gefran:

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

0.18 = €20m ÷ (€178m - €65m) (Based on the trailing twelve months to March 2022).

So, Gefran has an ROCE of 18%. In absolute terms, that's a satisfactory return, but compared to the Electronic industry average of 8.8% it's much better.

View our latest analysis for Gefran

Above you can see how the current ROCE for Gefran 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.

How Are Returns Trending?

The trends we've noticed at Gefran are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 18%. The amount of capital employed has increased too, by 24%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Key Takeaway

All in all, it's terrific to see that Gefran is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a solid 68% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

On a final note, we found 2 warning signs for Gefran (1 can't be ignored) you should be aware of.

While Gefran 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.