Returns Are Gaining Momentum At S.C. Bucur (BVB:BUCV)

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. So when we looked at S.C. Bucur (BVB:BUCV) and its trend of ROCE, we really liked what we saw.

What Is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on S.C. Bucur is:

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

0.045 = RON5.4m ÷ (RON130m - RON9.1m) (Based on the trailing twelve months to June 2024).

Thus, S.C. Bucur has an ROCE of 4.5%. On its own that's a low return on capital but it's in line with the industry's average returns of 4.5%.

View our latest analysis for S.C. Bucur

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

What The Trend Of ROCE Can Tell Us

While the ROCE isn't as high as some other companies out there, it's great to see it's on the up. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 580% in that same time. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

The Key Takeaway

In summary, we're delighted to see that S.C. Bucur has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And with a respectable 26% awarded to those who held the stock over the last year, you could argue that these developments are starting to get the attention they deserve. In light of that, we think it's worth looking further into this stock because if S.C. Bucur can keep these trends up, it could have a bright future ahead.

On a final note, we've found 3 warning signs for S.C. Bucur that we think you should be aware of.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.