B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653 (AMS:PORF) Shareholders Will Want The ROCE Trajectory To Continue

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Speaking of which, we noticed some great changes in B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653's (AMS:PORF) returns on capital, so let's have a look.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653 is:

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

0.016 = €537k ÷ (€37m - €3.8m) (Based on the trailing twelve months to December 2023).

Thus, B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653 has an ROCE of 1.6%. In absolute terms, that's a low return and it also under-performs the Consumer Durables industry average of 8.8%.

See our latest analysis for B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653 has performed in the past in other metrics, you can view this free graph of B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653's past earnings, revenue and cash flow.

The Trend Of ROCE

B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653 has recently broken into profitability so their prior investments seem to be paying off. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 1.6% on its capital. And unsurprisingly, like most companies trying to break into the black, B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653 is utilizing 38% more capital than it was five years ago. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

The Bottom Line

Overall, B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653 gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 12% to shareholders. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 5 warning signs for B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653 (of which 1 is a bit concerning!) that you should know about.

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.