QuickBit eu (NGM:QBIT) Is Looking To Continue Growing Its Returns On Capital

There are a few key trends to look for if we want to identify the next multi-bagger. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in QuickBit eu's (NGM:QBIT) returns on capital, so let's have a look.

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 QuickBit eu, this is the formula:

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

0.12 = kr32m ÷ (kr342m - kr74m) (Based on the trailing twelve months to March 2021).

Thus, QuickBit eu has an ROCE of 12%. By itself that's a normal return on capital and it's in line with the industry's average returns of 12%.

View our latest analysis for QuickBit eu

Historical performance is a great place to start when researching a stock so above you can see the gauge for QuickBit eu's ROCE against it's prior returns. If you're interested in investigating QuickBit eu's past further, check out this free graph of past earnings, revenue and cash flow.

How Are Returns Trending?

We're delighted to see that QuickBit eu is reaping rewards from its investments and is now generating some pre-tax profits. About three years ago the company was generating losses but things have turned around because it's now earning 12% on its capital. Not only that, but the company is utilizing 7,180% more capital than before, but that's to be expected from a company trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

One more thing to note, QuickBit eu has decreased current liabilities to 22% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. This tells us that QuickBit eu has grown its returns without a reliance on increasing their current liabilities, which we're very happy with.

The Bottom Line On QuickBit eu's ROCE

Overall, QuickBit eu gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. And with a respectable 16% awarded to those who held the stock over the last year, you could argue that these developments are starting to get the attention they deserve. Therefore, we think it would be worth your time to check if these trends are going to continue.

QuickBit eu does have some risks though, and we've spotted 3 warning signs for QuickBit eu that you might be interested in.

While QuickBit eu isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.
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