Investors Will Want Impresa - Sociedade Gestora de Participações Sociais' (ELI:IPR) Growth In ROCE To Persist

To find a multi-bagger stock, what are the underlying trends we should look for in a business? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, we've noticed some promising trends at Impresa - Sociedade Gestora de Participações Sociais (ELI:IPR) so let's look a bit deeper.

Return On Capital Employed (ROCE): What is it?

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 Impresa - Sociedade Gestora de Participações Sociais:

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

0.088 = €25m ÷ (€391m - €105m) (Based on the trailing twelve months to December 2020).

Therefore, Impresa - Sociedade Gestora de Participações Sociais has an ROCE of 8.8%. On its own, that's a low figure but it's around the 9.9% average generated by the Media industry.

See our latest analysis for Impresa - Sociedade Gestora de Participações Sociais

Historical performance is a great place to start when researching a stock so above you can see the gauge for Impresa - Sociedade Gestora de Participações Sociais' ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Impresa - Sociedade Gestora de Participações Sociais, check out these free graphs here.

What Does the ROCE Trend For Impresa - Sociedade Gestora de Participações Sociais Tell Us?

Impresa - Sociedade Gestora de Participações Sociais' ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 53% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

Our Take On Impresa - Sociedade Gestora de Participações Sociais' ROCE

To sum it up, Impresa - Sociedade Gestora de Participações Sociais is collecting higher returns from the same amount of capital, and that's impressive. Considering the stock has delivered 18% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

If you want to know some of the risks facing Impresa - Sociedade Gestora de Participações Sociais we've found 3 warning signs (1 doesn't sit too well with us!) that you should be aware of before investing here.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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