Kindred Group (STO:KIND SDB) Could Become A Multi-Bagger

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at the ROCE trend of Kindred Group (STO:KIND SDB) we really liked what we saw.

Return On Capital Employed (ROCE): What is it?

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 Kindred Group is:

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

0.48 = UK£303m ÷ (UK£1.0b - UK£415m) (Based on the trailing twelve months to March 2021).

Thus, Kindred Group has an ROCE of 48%. That's a fantastic return and not only that, it outpaces the average of 19% earned by companies in a similar industry.

View our latest analysis for Kindred Group

In the above chart we have measured Kindred Group's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Kindred Group here for free.

What Can We Tell From Kindred Group's ROCE Trend?

We like the trends that we're seeing from Kindred Group. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 48%. 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 156%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

In Conclusion...

To sum it up, Kindred Group has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 103% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you'd like to know more about Kindred Group, we've spotted 3 warning signs, and 1 of them can't be ignored.

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.

When trading Kindred Group or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.