Mintra Holding (OB:MNTR) Might Have The Makings Of A Multi-Bagger

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. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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. Speaking of which, we noticed some great changes in Mintra Holding's (OB:MNTR) returns on capital, so let's have a 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. To calculate this metric for Mintra Holding, this is the formula:

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

0.044 = kr38m ÷ (kr976m - kr117m) (Based on the trailing twelve months to June 2022).

Therefore, Mintra Holding has an ROCE of 4.4%. Ultimately, that's a low return and it under-performs the Software industry average of 11%.

See our latest analysis for Mintra Holding

In the above chart we have measured Mintra Holding's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Mintra Holding here for free.

What Does the ROCE Trend For Mintra Holding Tell Us?

We're delighted to see that Mintra Holding 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 three years ago but is is now generating 4.4% on its capital. Not only that, but the company is utilizing 188% more capital than before, but that's to be expected from a company trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

One more thing to note, Mintra Holding has decreased current liabilities to 12% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance.

In Conclusion...

Long story short, we're delighted to see that Mintra Holding's reinvestment activities have paid off and the company is now profitable. Astute investors may have an opportunity here because the stock has declined 28% in the last year. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

On a separate note, we've found 2 warning signs for Mintra Holding you'll probably want to know about.

While Mintra Holding 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.