The Return Trends At QuickBit eu (NGM:QBIT) Look Promising

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. So on that note, QuickBit eu (NGM:QBIT) looks quite promising in regards to its trends of return on capital.

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

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on QuickBit eu is:

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

0.0074 = €184k ÷ (€35m - €9.7m) (Based on the trailing twelve months to September 2021).

Thus, QuickBit eu has an ROCE of 0.7%. Ultimately, that's a low return and it under-performs the Software industry average of 19%.

See our latest analysis for QuickBit eu

Above you can see how the current ROCE for QuickBit eu 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 QuickBit eu here for free.

What Can We Tell From QuickBit eu's ROCE Trend?

QuickBit eu has recently broken into profitability so their prior investments seem to be paying off. Shareholders would no doubt be pleased with this because the business was loss-making four years ago but is is now generating 0.7% on its capital. And unsurprisingly, like most companies trying to break into the black, QuickBit eu is utilizing 6,316% more capital than it was four years ago. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

In Conclusion...

Long story short, we're delighted to see that QuickBit eu's reinvestment activities have paid off and the company is now profitable. And with a respectable 11% 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. In light of that, we think it's worth looking further into this stock because if QuickBit eu can keep these trends up, it could have a bright future ahead.

If you want to continue researching QuickBit eu, you might be interested to know about the 1 warning sign that our analysis has discovered.

While QuickBit eu 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.

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

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.