Will The ROCE Trend At SC Cemacon (BVB:CEON) Continue?

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding 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. So on that note, SC Cemacon (BVB:CEON) looks quite promising in regards to its trends of return on capital.

Return On Capital Employed (ROCE): What is it?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for SC Cemacon:

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

0.11 = RON25m ÷ (RON260m - RON37m) (Based on the trailing twelve months to September 2020).

Thus, SC Cemacon has an ROCE of 11%. On its own, that's a standard return, however it's much better than the 7.9% generated by the Basic Materials industry.

View our latest analysis for SC Cemacon

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're interested in investigating SC Cemacon's past further, check out this free graph of past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

Investors would be pleased with what's happening at SC Cemacon. Over the last five years, returns on capital employed have risen substantially to 11%. Basically the business is earning more per dollar of capital invested and in addition to that, 52% more capital is being employed now too. So we're very much inspired by what we're seeing at SC Cemacon thanks to its ability to profitably reinvest capital.

What We Can Learn From 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. Since the stock has returned a staggering 400% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if SC Cemacon can keep these trends up, it could have a bright future ahead.

On a final note, we've found 2 warning signs for SC Cemacon that we think you should be aware of.

While SC Cemacon isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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