TCECUR Sweden (NGM:TCC A) Shareholders Will Want The ROCE Trajectory To Continue

There are a few key trends to look for if we want to identify the next multi-bagger. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at TCECUR Sweden (NGM:TCC A) and its trend of ROCE, we really liked what we saw.

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

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 TCECUR Sweden, this is the formula:

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

0.044 = kr16m ÷ (kr522m - kr167m) (Based on the trailing twelve months to June 2024).

So, TCECUR Sweden has an ROCE of 4.4%. Ultimately, that's a low return and it under-performs the Communications industry average of 10%.

View our latest analysis for TCECUR Sweden

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'd like to look at how TCECUR Sweden has performed in the past in other metrics, you can view this free graph of TCECUR Sweden's past earnings, revenue and cash flow.

What Does the ROCE Trend For TCECUR Sweden Tell Us?

We're delighted to see that TCECUR Sweden is reaping rewards from its investments and is now generating some pre-tax profits. The company was generating losses five years ago, but now it's earning 4.4% which is a sight for sore eyes. Not only that, but the company is utilizing 216% 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.

The Key Takeaway

Overall, TCECUR Sweden gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. Astute investors may have an opportunity here because the stock has declined 17% in the last five years. So researching this company further and determining whether or not these trends will continue seems justified.

Like most companies, TCECUR Sweden does come with some risks, and we've found 2 warning signs that you should be aware of.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.