Miraculum (WSE:MIR) Is Experiencing Growth In Returns On Capital

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at Miraculum (WSE:MIR) so let's look a bit deeper.

Return On Capital Employed (ROCE): What Is It?

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. The formula for this calculation on Miraculum is:

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

0.016 = zł754k ÷ (zł60m - zł13m) (Based on the trailing twelve months to June 2024).

Thus, Miraculum has an ROCE of 1.6%. In absolute terms, that's a low return and it also under-performs the Personal Products industry average of 12%.

View our latest analysis for Miraculum

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Miraculum.

What Does the ROCE Trend For Miraculum Tell Us?

The fact that Miraculum is now generating some pre-tax profits from its prior investments is very encouraging. The company was generating losses five years ago, but now it's earning 1.6% which is a sight for sore eyes. Not only that, but the company is utilizing 58% more capital than before, but that's to be expected from a company trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

One more thing to note, Miraculum has decreased current liabilities to 22% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. So this improvement in ROCE has come from the business' underlying economics, which is great to see.

What We Can Learn From Miraculum's ROCE

In summary, it's great to see that Miraculum has managed to break into profitability and is continuing to reinvest in its business. Astute investors may have an opportunity here because the stock has declined 30% in the last five years. With that in mind, we believe the promising trends warrant this stock for further investigation.

One more thing: We've identified 3 warning signs with Miraculum (at least 2 which are concerning) , and understanding these would certainly be useful.

While Miraculum may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.