Mips (STO:MIPS) Is Reinvesting To Multiply In Value

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. Ergo, when we looked at the ROCE trends at Mips (STO:MIPS), we liked 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. The formula for this calculation on Mips is:

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

0.28 = kr187m ÷ (kr742m - kr77m) (Based on the trailing twelve months to March 2025).

So, Mips has an ROCE of 28%. In absolute terms that's a great return and it's even better than the Leisure industry average of 12%.

Check out our latest analysis for Mips

In the above chart we have measured Mips' 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 Mips .

What Does the ROCE Trend For Mips Tell Us?

Mips deserves to be commended in regards to it's returns. The company has employed 81% more capital in the last five years, and the returns on that capital have remained stable at 28%. Now considering ROCE is an attractive 28%, this combination is actually pretty appealing because it means the business can consistently put money to work and generate these high returns. If these trends can continue, it wouldn't surprise us if the company became a multi-bagger.

The Bottom Line

In summary, we're delighted to see that Mips has been compounding returns by reinvesting at consistently high rates of return, as these are common traits of a multi-bagger. In light of this, the stock has only gained 37% over the last five years for shareholders who have owned the stock in this period. So because of the trends we're seeing, we'd recommend looking further into this stock to see if it has the makings of a multi-bagger.

While Mips looks impressive, no company is worth an infinite price. The intrinsic value infographic for MIPS helps visualize whether it is currently trading for a fair price.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets 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.