There's Been No Shortage Of Growth Recently For Ice Fish Farm's (OB:IFISH) Returns On Capital

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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, we've noticed some promising trends at Ice Fish Farm (OB:IFISH) so let's look a bit deeper.

Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Ice Fish Farm:

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

0.044 = kr216m ÷ (kr5.2b - kr344m) (Based on the trailing twelve months to March 2024).

Thus, Ice Fish Farm has an ROCE of 4.4%. Ultimately, that's a low return and it under-performs the Food industry average of 8.3%.

View our latest analysis for Ice Fish Farm

In the above chart we have measured Ice Fish Farm's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Ice Fish Farm .

The Trend Of ROCE

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. Over the last five years, returns on capital employed have risen substantially to 4.4%. The amount of capital employed has increased too, by 1,091%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

One more thing to note, Ice Fish Farm has decreased current liabilities to 6.6% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. This tells us that Ice Fish Farm has grown its returns without a reliance on increasing their current liabilities, which we're very happy with.

What We Can Learn From Ice Fish Farm's ROCE

To sum it up, Ice Fish Farm has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Astute investors may have an opportunity here because the stock has declined 40% in the last three years. So researching this company further and determining whether or not these trends will continue seems justified.

If you want to continue researching Ice Fish Farm, you might be interested to know about the 2 warning signs that our analysis has discovered.

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.