S.C. Mobest (BVB:MOBE) Shareholders Will Want The ROCE Trajectory To Continue

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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, S.C. Mobest (BVB:MOBE) looks quite promising in regards to its trends of return on capital.

What Is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on S.C. Mobest is:

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

0.038 = RON2.9m ÷ (RON79m - RON2.1m) (Based on the trailing twelve months to June 2024).

So, S.C. Mobest has an ROCE of 3.8%. In absolute terms, that's a low return and it also under-performs the Retail Distributors industry average of 9.9%.

See our latest analysis for S.C. Mobest

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

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

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 63% in that same time. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

The Bottom Line On S.C. Mobest's ROCE

As discussed above, S.C. Mobest appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 8.8% return over the last year. In light of that, we think it's worth looking further into this stock because if S.C. Mobest can keep these trends up, it could have a bright future ahead.

S.C. Mobest does come with some risks though, we found 5 warning signs in our investment analysis, and 2 of those can't be ignored...

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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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.