Investors Will Want B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653's (AMS:PORF) Growth In ROCE To Persist

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, we've noticed some promising trends at B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653 (AMS:PORF) so let's look a bit deeper.

Return On Capital Employed (ROCE): What Is It?

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. To calculate this metric for B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653, this is the formula:

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

0.029 = €986k ÷ (€37m - €3.0m) (Based on the trailing twelve months to December 2022).

Therefore, B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653 has an ROCE of 2.9%. Ultimately, that's a low return and it under-performs the Consumer Durables industry average of 11%.

Check out 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 past earnings, revenue and cash flow.

SWOT Analysis for B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653

What Can We Tell From B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653's ROCE Trend?

We're delighted to see that B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653 is reaping rewards from its investments and is now generating some pre-tax profits. The company was generating losses five years ago, but now it's earning 2.9% which is a sight for sore eyes. Not only that, but the company is utilizing 198% more capital than before, but that's to be expected from a company trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

In another part of our analysis, we noticed that the company's ratio of current liabilities to total assets decreased to 8.0%, which broadly means the business is relying less on its suppliers or short-term creditors to fund its operations. Therefore we can rest assured that the growth in ROCE is a result of the business' fundamental improvements, rather than a cooking class featuring this company's books.

In Conclusion...

Long story short, we're delighted to see that B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653's reinvestment activities have paid off and the company is now profitable. And with a respectable 45% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

On a final note, we found 3 warning signs for B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653 (1 is a bit unpleasant) you should be aware of.

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.