Boozt (STO:BOOZT) Might Have The Makings Of A Multi-Bagger

What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Speaking of which, we noticed some great changes in Boozt's (STO:BOOZT) returns on capital, so let's have a look.

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 Boozt:

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

0.091 = kr320m ÷ (kr5.4b - kr1.9b) (Based on the trailing twelve months to June 2024).

So, Boozt has an ROCE of 9.1%. In absolute terms, that's a low return but it's around the Multiline Retail industry average of 10%.

Check out our latest analysis for Boozt

In the above chart we have measured Boozt's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Boozt .

What Does the ROCE Trend For Boozt Tell Us?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. Over the last five years, returns on capital employed have risen substantially to 9.1%. Basically the business is earning more per dollar of capital invested and in addition to that, 159% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line On Boozt's ROCE

To sum it up, Boozt has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a solid 85% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

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

While Boozt may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list 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.