Is There More Growth In Store For Glintt - Global Intelligent Technologies' (ELI:GLINT) Returns On Capital?

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at Glintt - Global Intelligent Technologies (ELI:GLINT) and its trend of ROCE, we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

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 Glintt - Global Intelligent Technologies is:

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

0.054 = €6.4m ÷ (€181m - €63m) (Based on the trailing twelve months to September 2020).

Thus, Glintt - Global Intelligent Technologies has an ROCE of 5.4%. In absolute terms, that's a low return and it also under-performs the IT industry average of 12%.

See our latest analysis for Glintt - Global Intelligent Technologies

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'd like to look at how Glintt - Global Intelligent Technologies has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For Glintt - Global Intelligent Technologies Tell Us?

We're pretty happy with how the ROCE has been trending at Glintt - Global Intelligent Technologies. We found that the returns on capital employed over the last five years have risen by 191%. That's not bad because this tells for every dollar invested (capital employed), the company is increasing the amount earned from that dollar. Speaking of capital employed, the company is actually utilizing 23% less than it was five years ago, which can be indicative of a business that's improving its efficiency. A business that's shrinking its asset base like this isn't usually typical of a soon to be multi-bagger company.

What We Can Learn From Glintt - Global Intelligent Technologies' ROCE

In the end, Glintt - Global Intelligent Technologies has proven it's capital allocation skills are good with those higher returns from less amount of capital. Astute investors may have an opportunity here because the stock has declined 38% in the last five years. With that in mind, we believe the promising trends warrant this stock for further investigation.

Glintt - Global Intelligent Technologies does come with some risks though, we found 5 warning signs in our investment analysis, and 1 of those is a bit concerning...

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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This article by Simply Wall St is general in nature. 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.
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