The Returns At Koninklijke Brill (AMS:BRILL) Aren't Growing

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Having said that, from a first glance at Koninklijke Brill (AMS:BRILL) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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. Analysts use this formula to calculate it for Koninklijke Brill:

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

0.14 = €4.5m ÷ (€55m - €21m) (Based on the trailing twelve months to June 2021).

So, Koninklijke Brill has an ROCE of 14%. That's a relatively normal return on capital, and it's around the 13% generated by the Media industry.

View our latest analysis for Koninklijke Brill

Historical performance is a great place to start when researching a stock so above you can see the gauge for Koninklijke Brill's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Koninklijke Brill, check out these free graphs here.

The Trend Of ROCE

Over the past five years, Koninklijke Brill's ROCE and capital employed have both remained mostly flat. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect Koninklijke Brill to be a multi-bagger going forward.

What We Can Learn From Koninklijke Brill's ROCE

In a nutshell, Koninklijke Brill has been trudging along with the same returns from the same amount of capital over the last five years. Unsurprisingly, the stock has only gained 9.9% over the last five years, which potentially indicates that investors are accounting for this going forward. 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 3 warning signs with Koninklijke Brill (at least 1 which is concerning) , and understanding them would certainly be useful.

While Koninklijke Brill 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.