SC Cemacon's (BVB:CEON) Returns On Capital Are Heading Higher

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at SC Cemacon (BVB:CEON) so let's look a bit deeper.

What is 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 SC Cemacon is:

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

0.12 = RON27m ÷ (RON263m - RON41m) (Based on the trailing twelve months to December 2020).

Therefore, SC Cemacon has an ROCE of 12%. On its own, that's a standard return, however it's much better than the 7.8% generated by the Basic Materials industry.

Check out our latest analysis for SC Cemacon

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

So How Is SC Cemacon's ROCE Trending?

SC Cemacon is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 12%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 36%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Bottom Line On SC Cemacon's ROCE

All in all, it's terrific to see that SC Cemacon is reaping the rewards from prior investments and is growing its capital base. And a remarkable 581% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

On a final note, we've found 2 warning signs for SC Cemacon 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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