4C Group (STO:4C) Has More To Do To Multiply In Value Going Forward

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So, when we ran our eye over 4C Group's (STO:4C) trend of ROCE, we liked what we saw.

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Understanding Return On Capital Employed (ROCE)

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 4C Group is:

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

0.13 = kr39m ÷ (kr492m - kr183m) (Based on the trailing twelve months to June 2025).

Therefore, 4C Group has an ROCE of 13%. That's a pretty standard return and it's in line with the industry average of 13%.

View our latest analysis for 4C Group

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating 4C Group's past further, check out this free graph covering 4C Group's past earnings, revenue and cash flow.

What Does the ROCE Trend For 4C Group Tell Us?

While the current returns on capital are decent, they haven't changed much. Over the past five years, ROCE has remained relatively flat at around 13% and the business has deployed 260% more capital into its operations. 13% is a pretty standard return, and it provides some comfort knowing that 4C Group has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

The Key Takeaway

The main thing to remember is that 4C Group has proven its ability to continually reinvest at respectable rates of return. What's surprising though is that the stock has collapsed 76% over the last three years, so there might be other areas of the business hurting its prospects. That's why it's worth looking further into this stock because while these fundamentals look good, there could be other issues with the business.

If you want to know some of the risks facing 4C Group we've found 4 warning signs (2 shouldn't be ignored!) that you should be aware of before investing here.

While 4C Group 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. 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.