Under The Bonnet, Artifex Mundi's (WSE:ART) Returns Look Impressive

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, the ROCE of Artifex Mundi (WSE:ART) looks great, so lets see what the trend can tell us.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Artifex Mundi is:

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

0.31 = zł28m ÷ (zł107m - zł17m) (Based on the trailing twelve months to March 2024).

Therefore, Artifex Mundi has an ROCE of 31%. That's a fantastic return and not only that, it outpaces the average of 18% earned by companies in a similar industry.

View our latest analysis for Artifex Mundi

Historical performance is a great place to start when researching a stock so above you can see the gauge for Artifex Mundi's ROCE against it's prior returns. If you're interested in investigating Artifex Mundi's past further, check out this free graph covering Artifex Mundi's past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

We like the trends that we're seeing from Artifex Mundi. The data shows that returns on capital have increased substantially over the last five years to 31%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 129%. So we're very much inspired by what we're seeing at Artifex Mundi thanks to its ability to profitably reinvest capital.

The Key Takeaway

In summary, it's great to see that Artifex Mundi 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 575% to shareholders over the last five years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Artifex Mundi does have some risks, we noticed 3 warning signs (and 1 which is concerning) we think you should know about.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets 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.