Some Investors May Be Worried About Infrastrutture Wireless Italiane's (BIT:INW) Returns On Capital

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after investigating Infrastrutture Wireless Italiane (BIT:INW), we don't think it's current trends fit the mold of a multi-bagger.

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 Infrastrutture Wireless Italiane, this is the formula:

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

0.066 = €558m ÷ (€9.3b - €810m) (Based on the trailing twelve months to September 2024).

So, Infrastrutture Wireless Italiane has an ROCE of 6.6%. In absolute terms, that's a low return and it also under-performs the Telecom industry average of 11%.

View our latest analysis for Infrastrutture Wireless Italiane

Above you can see how the current ROCE for Infrastrutture Wireless Italiane compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Infrastrutture Wireless Italiane .

What Does the ROCE Trend For Infrastrutture Wireless Italiane Tell Us?

When we looked at the ROCE trend at Infrastrutture Wireless Italiane, we didn't gain much confidence. Around five years ago the returns on capital were 8.9%, but since then they've fallen to 6.6%. On the other hand, the company has been employing more capital without a corresponding improvement in sales in the last year, which could suggest these investments are longer term plays. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

Our Take On Infrastrutture Wireless Italiane's ROCE

To conclude, we've found that Infrastrutture Wireless Italiane is reinvesting in the business, but returns have been falling. And with the stock having returned a mere 39% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.

One more thing: We've identified 2 warning signs with Infrastrutture Wireless Italiane (at least 1 which makes us a bit uncomfortable) , and understanding these would certainly be useful.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.