VNE's (BIT:VNE) Returns Have Hit A Wall

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Although, when we looked at VNE (BIT:VNE), it didn't seem to tick all of these boxes.

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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. The formula for this calculation on VNE is:

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

0.0086 = €164k ÷ (€29m - €9.5m) (Based on the trailing twelve months to December 2024).

Therefore, VNE has an ROCE of 0.9%. Ultimately, that's a low return and it under-performs the Tech industry average of 11%.

View our latest analysis for VNE

Above you can see how the current ROCE for VNE 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 analyst report for VNE .

The Trend Of ROCE

The returns on capital haven't changed much for VNE in recent years. The company has employed 51% more capital in the last three years, and the returns on that capital have remained stable at 0.9%. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

The Bottom Line

As we've seen above, VNE's returns on capital haven't increased but it is reinvesting in the business. Since the stock has declined 17% over the last year, investors may not be too optimistic on this trend improving either. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

One more thing: We've identified 3 warning signs with VNE (at least 2 which make us uncomfortable) , and understanding these would certainly be useful.

While VNE 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.