S.C. Helios (BVB:HEAL) Is Experiencing Growth In Returns On Capital

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. 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 S.C. Helios' (BVB:HEAL) returns on capital, so let's have a look.

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What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for S.C. Helios, this is the formula:

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

0.14 = RON6.2m ÷ (RON57m - RON11m) (Based on the trailing twelve months to December 2024).

So, S.C. Helios has an ROCE of 14%. On its own, that's a standard return, however it's much better than the 7.6% generated by the Basic Materials industry.

Check out our latest analysis for S.C. Helios

Historical performance is a great place to start when researching a stock so above you can see the gauge for S.C. Helios' ROCE against it's prior returns. If you'd like to look at how S.C. Helios has performed in the past in other metrics, you can view this free graph of S.C. Helios' past earnings, revenue and cash flow.

The Trend Of ROCE

S.C. Helios is showing promise given that its ROCE is trending up and to the right. The figures show that over the last five years, ROCE has grown 97% whilst employing roughly the same amount of capital. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. 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 Bottom Line

In summary, we're delighted to see that S.C. Helios has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And a remarkable 110% total return over the last year tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

On a separate note, we've found 2 warning signs for S.C. Helios you'll probably want to know about.

While S.C. Helios may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.