Investors Should Be Encouraged By BE Semiconductor Industries' (AMS:BESI) Returns On Capital

What trends should we look for it we want to identify stocks that can multiply in value over the long term? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. And in light of that, the trends we're seeing at BE Semiconductor Industries' (AMS:BESI) look very promising so lets take 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. Analysts use this formula to calculate it for BE Semiconductor Industries:

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

0.34 = €337m ÷ (€1.2b - €169m) (Based on the trailing twelve months to June 2022).

So, BE Semiconductor Industries has an ROCE of 34%. That's a fantastic return and not only that, it outpaces the average of 11% earned by companies in a similar industry.

Check out our latest analysis for BE Semiconductor Industries

Above you can see how the current ROCE for BE Semiconductor Industries compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

What The Trend Of ROCE Can Tell Us

We like the trends that we're seeing from BE Semiconductor Industries. The data shows that returns on capital have increased substantially over the last five years to 34%. The amount of capital employed has increased too, by 103%. So we're very much inspired by what we're seeing at BE Semiconductor Industries thanks to its ability to profitably reinvest capital.

The Key Takeaway

In summary, it's great to see that BE Semiconductor Industries can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Since the stock has returned a staggering 158% to shareholders over the last five years, it looks like investors are recognizing these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

BE Semiconductor Industries does have some risks though, and we've spotted 3 warning signs for BE Semiconductor Industries that you might be interested in.

High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.