Advertisement
If you're looking for a multi-bagger, there's a few things to keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. That's why when we briefly looked at DevPort's (STO:DEVP B) ROCE trend, we were very happy with what we saw.
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. The formula for this calculation on DevPort is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.35 = kr46m ÷ (kr261m - kr129m) (Based on the trailing twelve months to September 2023).
Thus, DevPort has an ROCE of 35%. In absolute terms that's a great return and it's even better than the IT industry average of 19%.
Check out our latest analysis for DevPort
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 want to delve into the historical earnings, revenue and cash flow of DevPort, check out these free graphs here.
So How Is DevPort's ROCE Trending?
In terms of DevPort's history of ROCE, it's quite impressive. Over the past five years, ROCE has remained relatively flat at around 35% and the business has deployed 68% more capital into its operations. Returns like this are the envy of most businesses and given it has repeatedly reinvested at these rates, that's even better. If DevPort can keep this up, we'd be very optimistic about its future.
Another thing to note, DevPort has a high ratio of current liabilities to total assets of 49%. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.
In Conclusion...
DevPort has demonstrated its proficiency by generating high returns on increasing amounts of capital employed, which we're thrilled about. However, over the last five years, the stock hasn't provided much growth to shareholders in the way of total returns. For that reason, savvy investors might want to look further into this company in case it's a prime investment.
DevPort does have some risks though, and we've spotted 2 warning signs for DevPort that you might be interested in.
High returns are a key ingredient to strong performance, so check out our free list ofstocks earning high returns on equity with solid balance sheets.
New: Manage All Your Stock Portfolios in One Place
We've created the ultimate portfolio companion for stock investors, and it's free.
• Connect an unlimited number of Portfolios and see your total in one currency
• Be alerted to new Warning Signs or Risks via email or mobile
• Track the Fair Value of your stocks
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.
About OM:DEVP B
DevPort
Operates as a technology consulting company in Sweden.
Excellent balance sheet with low risk.
Market Insights
Advertisement
Weekly Picks
LO
Lou_Basenese on Optimi Health ·
The Only Psychedelic Company Already Selling MDMA and Psilocybin to Real Patients, Yet Priced Like It Doesn’t Exist
Fair Value:US$1157.5% undervalued
48 followersusers have followed this narrative
2 commentsusers have commented on this narrative
8 likesusers have liked this narrative
WE
WealthAP on Novo Nordisk ·
Novo Nordisk (NVO): Is the "Easy Growth" Story Over?
Fair Value:DKK 407.7721.4% undervalued
69 followersusers have followed this narrative
0 commentsusers have commented on this narrative
8 likesusers have liked this narrative
VA
ValueInvestingSubstack on Zoetis ·
Zoetis down -50% over the past year
Fair Value:US$92.9218.9% undervalued
23 followersusers have followed this narrative
0 commentsusers have commented on this narrative
9 likesusers have liked this narrative
CE
CentryResearch on Centrus Energy ·
Centrus Energy: The Next Nuclear Bottleneck Isn't Reactors. It's Fuel.
Fair Value:US$19013.7% undervalued
24 followersusers have followed this narrative
0 commentsusers have commented on this narrative
10 likesusers have liked this narrative
Recently Updated Narratives
WI
WisetoWealth on PayPal Holdings ·
The Underrated Transformation of a Digital Payments Giant
Fair Value:US$90.3137.8% undervalued
4 followersusers have followed this narrative
0 commentsusers have commented on this narrative
0 likesusers have liked this narrative
BL
Blagget on Terra Balcanica Resources ·
The C$4M Explorer Positioned to Become Europe's First Antimony Mine
Fair Value:CA$0.487.5% undervalued
3 followersusers have followed this narrative
0 commentsusers have commented on this narrative
0 likesusers have liked this narrative
DA
david_6nroa on Charter Communications ·
Charter is undervalued - Here's why.
Fair Value:US$87.0741.6% overvalued
1 followerusers have followed this narrative
0 commentsusers have commented on this narrative
0 likesusers have liked this narrative
Popular Narratives
CU
CubanEros on Microsoft ·
A wonderful business at reasonable price.
Fair Value:US$419.919.1% undervalued
81 followersusers have followed this narrative
0 commentsusers have commented on this narrative
6 likesusers have liked this narrative
OS
oscargarcia on NVIDIA ·
The company that went from selling GPUs to gamers to becoming the AI arms dealer of the 21st century.
Fair Value:US$28026.1% undervalued
188 followersusers have followed this narrative
9 commentsusers have commented on this narrative
15 likesusers have liked this narrative
BE
benjamin_lvieq on PayPal Holdings ·
PayPal: PayPal Doesn't Need to Grow – It Needs to Stop Falling – A Mispriced Cash Machine With a Cannibal Buyback
Fair Value:US$6513.6% undervalued
72 followersusers have followed this narrative
2 commentsusers have commented on this narrative
11 likesusers have liked this narrative
Trending Discussion
DE
derek_3wsdg on Teladoc Health ·
You’ve overlooked the activist investor factor. Travis Cocke’s Voss has announced 5% ownership through a 13G filing. They’ve added to that 5% since, and in doing so, have created a structural trap door for 27.42 Million Shares actively sold short. Chuck will announce lots of positives on July 29 but it’s what Voss announces shortly after that will rock the overextended Teledoc shorts. The Walmart partnership is the tip of the iceberg. The market is missing the sheer regulatory and enterprise friction of modern corporate healthcare. Teladoc isn't a "consumer app"; it is the primary digital infrastructure integrated directly into the legacy backends of Tier-1 insurance companies and fortune 500 employers, covering 105 million+ lives. Teladoc is acting as the digital top-of-funnel engine for the world's largest retailer. If Voss pushes the narrative that Teladoc is effectively the outsourced digital brain of Walmart's entire healthcare footprint, the fair value shifts from a basic health multiple to an enterprise distribution premium. Additionally , we are in a structural gold rush for high-quality, legally compliant, longitudinal medical data to train vertical healthcare AI models. Large technology hyperscalers and pharmaceutical giants cannot simply scrape the internet for this; they need structured clinical inputs. Teladoc sits on one of the largest de-identified virtual medical datasets on earth. From the activist playbook , we’ll see Voss demand the immediate creation of a Data & Diagnostics Licensing Division, transforming a legacy liability into an incredibly high-margin, pure-software data asset that requires zero human clinician hours to scale. Chuck is doing great work and deserves credi5 for the Teledoc turnaround but it will be Travis Cocke who will be responsible for a share price way beyond your $15 valuation.
1
|0
