S.P.E.E.H. Hidroelectrica (BVB:H2O) Has Some Way To Go To Become A Multi-Bagger

If you're looking for a multi-bagger, there's a few things to 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. That's why when we briefly looked at S.P.E.E.H. Hidroelectrica's (BVB:H2O) ROCE trend, we were pretty happy with what we saw.

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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.P.E.E.H. Hidroelectrica, this is the formula:

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

0.14 = RON3.6b ÷ (RON28b - RON1.4b) (Based on the trailing twelve months to March 2025).

Thus, S.P.E.E.H. Hidroelectrica has an ROCE of 14%. On its own, that's a standard return, however it's much better than the 7.0% generated by the Renewable Energy industry.

See our latest analysis for S.P.E.E.H. Hidroelectrica

In the above chart we have measured S.P.E.E.H. Hidroelectrica's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for S.P.E.E.H. Hidroelectrica .

So How Is S.P.E.E.H. Hidroelectrica's ROCE Trending?

While the returns on capital are good, they haven't moved much. The company has employed 60% more capital in the last five years, and the returns on that capital have remained stable at 14%. Since 14% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

The Bottom Line On S.P.E.E.H. Hidroelectrica's ROCE

To sum it up, S.P.E.E.H. Hidroelectrica has simply been reinvesting capital steadily, at those decent rates of return. And since the stock has risen strongly over the last year, it appears the market might expect this trend to continue. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

S.P.E.E.H. Hidroelectrica does have some risks though, and we've spotted 1 warning sign for S.P.E.E.H. Hidroelectrica that you might be interested in.

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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.