Investors Will Want Munters Group's (STO:MTRS) Growth In ROCE To Persist

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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, Munters Group (STO:MTRS) looks quite promising in regards to its trends of return on capital.

Understanding 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. Analysts use this formula to calculate it for Munters Group:

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

0.15 = kr1.9b ÷ (kr19b - kr5.9b) (Based on the trailing twelve months to September 2024).

Therefore, Munters Group has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 12% generated by the Building industry.

View our latest analysis for Munters Group

In the above chart we have measured Munters Group'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 Munters Group .

How Are Returns Trending?

Munters Group is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 15%. 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 57%. So we're very much inspired by what we're seeing at Munters Group thanks to its ability to profitably reinvest capital.

The Bottom Line On Munters Group's ROCE

All in all, it's terrific to see that Munters Group is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 267% to shareholders over the last five years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

One more thing, we've spotted 1 warning sign facing Munters Group that you might find interesting.

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.