Returns At B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653 (AMS:PORF) Are On The Way Up

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. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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. So when we looked at B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653 (AMS:PORF) and its trend of ROCE, we really liked what we saw.

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. 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)

0.024 = €807k ÷ (€37m - €3.1m) (Based on the trailing twelve months to June 2023).

So, B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653 has an ROCE of 2.4%. Ultimately, that's a low return and it under-performs the Consumer Durables industry average of 10%.

View 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 want to delve into the historical earnings, revenue and cash flow of B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653, check out these free graphs here.

So How Is B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653's ROCE Trending?

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. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 2.4% 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 107% more capital than it was five years ago. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

Our Take On B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653's ROCE

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 25% to shareholders. So with that in mind, we think the stock deserves further research.

On a final note, we found 4 warning signs for B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653 (2 are potentially serious) you should be aware of.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.