S.N. Nuclearelectrica (BVB:SNN) Is Looking To Continue Growing Its Returns On Capital

If you're looking for a multi-bagger, there's a few things to keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in S.N. Nuclearelectrica's (BVB:SNN) returns on capital, so let's have a look.

Return On Capital Employed (ROCE): What Is It?

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. Analysts use this formula to calculate it for S.N. Nuclearelectrica:

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

0.17 = RON2.0b ÷ (RON13b - RON689m) (Based on the trailing twelve months to June 2024).

Thus, S.N. Nuclearelectrica has an ROCE of 17%. On its own, that's a standard return, however it's much better than the 7.5% generated by the Electric Utilities industry.

See our latest analysis for S.N. Nuclearelectrica

In the above chart we have measured S.N. Nuclearelectrica'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.N. Nuclearelectrica .

What Can We Tell From S.N. Nuclearelectrica's ROCE Trend?

S.N. Nuclearelectrica is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 17%. 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 46%. So we're very much inspired by what we're seeing at S.N. Nuclearelectrica thanks to its ability to profitably reinvest capital.

The Key Takeaway

All in all, it's terrific to see that S.N. Nuclearelectrica is reaping the rewards from prior investments and is growing its capital base. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

S.N. Nuclearelectrica does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those shouldn't be ignored...

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

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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.