Here’s What’s Happening With Returns At S.C. Prebet Aiud (BVB:PREB)

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. 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 S.C. Prebet Aiud's (BVB:PREB) returns on capital, so let's have a look.

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. To calculate this metric for S.C. Prebet Aiud, this is the formula:

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

0.19 = RON9.4m ÷ (RON56m - RON7.2m) (Based on the trailing twelve months to September 2020).

Therefore, S.C. Prebet Aiud has an ROCE of 19%. On its own, that's a standard return, however it's much better than the 8.0% generated by the Basic Materials industry.

Check out our latest analysis for S.C. Prebet Aiud

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

What Can We Tell From S.C. Prebet Aiud's ROCE Trend?

We like the trends that we're seeing from S.C. Prebet Aiud. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 19%. The amount of capital employed has increased too, by 60%. So we're very much inspired by what we're seeing at S.C. Prebet Aiud thanks to its ability to profitably reinvest capital.

Our Take On S.C. Prebet Aiud's ROCE

In summary, it's great to see that S.C. Prebet Aiud can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Since the stock has returned a staggering 497% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you'd like to know about the risks facing S.C. Prebet Aiud, we've discovered 1 warning sign that you should be aware of.

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

When trading S.C. Prebet Aiud or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.