Investors Should Be Encouraged By S.C. Macofil's (BVB:MACO) Returns On Capital

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at the ROCE trend of S.C. Macofil (BVB:MACO) we really liked what we saw.

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 S.C. Macofil:

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

0.25 = RON29m ÷ (RON125m - RON9.6m) (Based on the trailing twelve months to June 2024).

Thus, S.C. Macofil has an ROCE of 25%. That's a fantastic return and not only that, it outpaces the average of 9.0% earned by companies in a similar industry.

Check out our latest analysis for S.C. Macofil

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

The Trend Of ROCE

S.C. Macofil is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 25%. 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 110%. So we're very much inspired by what we're seeing at S.C. Macofil thanks to its ability to profitably reinvest capital.

What We Can Learn From S.C. Macofil'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 S.C. Macofil has. And with a respectable 28% 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. 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 separate note, we've found 2 warning signs for S.C. Macofil you'll probably want to know about.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets 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.