Checkin.Com Group's (STO:CHECK) Returns On Capital Are Heading Higher

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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 on that note, Checkin.Com Group (STO:CHECK) looks quite promising in regards to its trends of return on capital.

Return On Capital Employed (ROCE): What Is It?

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 Checkin.Com Group:

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

0.0075 = kr1.7m ÷ (kr247m - kr22m) (Based on the trailing twelve months to September 2023).

Thus, Checkin.Com Group has an ROCE of 0.8%. In absolute terms, that's a low return and it also under-performs the Software industry average of 8.0%.

View our latest analysis for Checkin.Com Group

In the above chart we have measured Checkin.Com Group's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Checkin.Com Group here for free.

What Can We Tell From Checkin.Com Group's ROCE Trend?

Checkin.Com Group 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 0.8% on its capital. Not only that, but the company is utilizing 2,697% more capital than before, but that's to be expected from a company 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.

What We Can Learn From Checkin.Com Group's ROCE

In summary, it's great to see that Checkin.Com Group has managed to break into profitability and is continuing to reinvest in its business. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 21% return over the last year. Therefore, we think it would be worth your time to check if these trends are going to continue.

While Checkin.Com Group looks impressive, no company is worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether CHECK is currently trading for a fair price.

While Checkin.Com Group 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.