Tomra Systems (OB:TOM) Has More To Do To Multiply In Value Going Forward

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So, when we ran our eye over Tomra Systems' (OB:TOM) trend of ROCE, we liked what we saw.

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What Is 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 Tomra Systems:

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

0.12 = €166m ÷ (€1.6b - €247m) (Based on the trailing twelve months to March 2025).

Therefore, Tomra Systems has an ROCE of 12%. On its own, that's a standard return, however it's much better than the 7.6% generated by the Machinery industry.

See our latest analysis for Tomra Systems

In the above chart we have measured Tomra Systems' prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Tomra Systems .

So How Is Tomra Systems' ROCE Trending?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. Over the past five years, ROCE has remained relatively flat at around 12% and the business has deployed 48% more capital into its operations. 12% is a pretty standard return, and it provides some comfort knowing that Tomra Systems has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

Our Take On Tomra Systems' ROCE

In the end, Tomra Systems has proven its ability to adequately reinvest capital at good rates of return. And given the stock has only risen 2.3% over the last five years, we'd suspect the market is beginning to recognize these trends. So to determine if Tomra Systems is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.

Tomra Systems does have some risks though, and we've spotted 1 warning sign for Tomra Systems that you might be interested in.

While Tomra Systems 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.