Capital Investment Trends At Concivia SA (Braila) (BVB:COKJ) Look Strong

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. That's why when we briefly looked at Concivia SA (Braila)'s (BVB:COKJ) ROCE trend, we were very happy with what we saw.

Understanding Return On Capital Employed (ROCE)

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. To calculate this metric for Concivia SA (Braila), this is the formula:

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

0.22 = RON25m ÷ (RON226m - RON111m) (Based on the trailing twelve months to June 2024).

So, Concivia SA (Braila) has an ROCE of 22%. In absolute terms that's a great return and it's even better than the Construction industry average of 4.1%.

View our latest analysis for Concivia SA (Braila)

Historical performance is a great place to start when researching a stock so above you can see the gauge for Concivia SA (Braila)'s ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Concivia SA (Braila).

What Can We Tell From Concivia SA (Braila)'s ROCE Trend?

Concivia SA (Braila) deserves to be commended in regards to it's returns. Over the past five years, ROCE has remained relatively flat at around 22% and the business has deployed 374% more capital into its operations. Returns like this are the envy of most businesses and given it has repeatedly reinvested at these rates, that's even better. If these trends can continue, it wouldn't surprise us if the company became a multi-bagger.

Another point to note, we noticed the company has increased current liabilities over the last five years. This is intriguing because if current liabilities hadn't increased to 49% of total assets, this reported ROCE would probably be less than22% because total capital employed would be higher.The 22% ROCE could be even lower if current liabilities weren't 49% of total assets, because the the formula would show a larger base of total capital employed. Additionally, this high level of current liabilities isn't ideal because it means the company's suppliers (or short-term creditors) are effectively funding a large portion of the business.

Our Take On Concivia SA (Braila)'s ROCE

In short, we'd argue Concivia SA (Braila) has the makings of a multi-bagger since its been able to compound its capital at very profitable rates of return. However, over the last year, the stock hasn't provided much growth to shareholders in the way of total returns. That's why we think it'd be worthwhile to look further into this stock given the fundamentals are appealing.

On a final note, we found 3 warning signs for Concivia SA (Braila) (1 is a bit unpleasant) you should be aware of.

Concivia SA (Braila) is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.