Turism Hoteluri Restaurante Marea Neagra (BVB:EFO) Shareholders Will Want The ROCE Trajectory To Continue

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in Turism Hoteluri Restaurante Marea Neagra's (BVB:EFO) returns on capital, so let's have a look.

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. To calculate this metric for Turism Hoteluri Restaurante Marea Neagra, this is the formula:

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

0.12 = RON45m ÷ (RON417m - RON24m) (Based on the trailing twelve months to September 2022).

Thus, Turism Hoteluri Restaurante Marea Neagra has an ROCE of 12%. In absolute terms, that's a satisfactory return, but compared to the Hospitality industry average of 5.8% it's much better.

View our latest analysis for Turism Hoteluri Restaurante Marea Neagra

Historical performance is a great place to start when researching a stock so above you can see the gauge for Turism Hoteluri Restaurante Marea Neagra's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Turism Hoteluri Restaurante Marea Neagra, check out these free graphs here.

What Can We Tell From Turism Hoteluri Restaurante Marea Neagra's ROCE Trend?

Turism Hoteluri Restaurante Marea Neagra is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 12%. The amount of capital employed has increased too, by 56%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line On Turism Hoteluri Restaurante Marea Neagra's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Turism Hoteluri Restaurante Marea Neagra has. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Turism Hoteluri Restaurante Marea Neagra does have some risks though, and we've spotted 3 warning signs for Turism Hoteluri Restaurante Marea Neagra that you might be interested in.

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. 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.