Returns on Capital Paint A Bright Future For C-Rad (STO:CRAD B)

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. And in light of that, the trends we're seeing at C-Rad's (STO:CRAD B) look very promising so lets take a look.

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What Is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for C-Rad, this is the formula:

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

0.20 = kr70m ÷ (kr479m - kr124m) (Based on the trailing twelve months to June 2025).

Therefore, C-Rad has an ROCE of 20%. That's a fantastic return and not only that, it outpaces the average of 7.9% earned by companies in a similar industry.

See our latest analysis for C-Rad

Above you can see how the current ROCE for C-Rad compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering C-Rad for free.

What The Trend Of ROCE Can Tell Us

C-Rad has recently broken into profitability so their prior investments seem to be paying off. About five years ago the company was generating losses but things have turned around because it's now earning 20% on its capital. In addition to that, C-Rad is employing 90% more capital than previously which is expected of a company that's trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

In Conclusion...

In summary, it's great to see that C-Rad has managed to break into profitability and is continuing to reinvest in its business. Astute investors may have an opportunity here because the stock has declined 21% in the last five years. So researching this company further and determining whether or not these trends will continue seems justified.

On a separate note, we've found 1 warning sign for C-Rad you'll probably want to know about.

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.