Aquila Part Prod Com (BVB:AQ) Might Have The Makings Of A Multi-Bagger

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at Aquila Part Prod Com (BVB:AQ) so let's look a bit deeper.

Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on Aquila Part Prod Com is:

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

0.17 = RON104m ÷ (RON906m - RON304m) (Based on the trailing twelve months to March 2023).

Therefore, Aquila Part Prod Com has an ROCE of 17%. On its own, that's a standard return, however it's much better than the 14% generated by the Logistics industry.

See our latest analysis for Aquila Part Prod Com

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 want to delve into the historical earnings, revenue and cash flow of Aquila Part Prod Com, check out these free graphs here.

What Can We Tell From Aquila Part Prod Com's ROCE Trend?

Aquila Part Prod Com is displaying some positive trends. Over the last four years, returns on capital employed have risen substantially to 17%. The amount of capital employed has increased too, by 324%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

One more thing to note, Aquila Part Prod Com has decreased current liabilities to 34% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. So this improvement in ROCE has come from the business' underlying economics, which is great to see.

The Key Takeaway

To sum it up, Aquila Part Prod Com has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a solid 43% to shareholders over the last year, it's fair to say investors are beginning to recognize these changes. In light of that, we think it's worth looking further into this stock because if Aquila Part Prod Com can keep these trends up, it could have a bright future ahead.

One more thing, we've spotted 1 warning sign facing Aquila Part Prod Com that you might find interesting.

While Aquila Part Prod Com 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.