The Return Trends At TCECUR Sweden (NGM:TCC A) Look Promising

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. 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?

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 TCECUR Sweden is:

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

0.0088 = kr2.9m ÷ (kr500m - kr168m) (Based on the trailing twelve months to September 2024).

So, TCECUR Sweden has an ROCE of 0.9%. In absolute terms, that's a low return and it also under-performs the Communications industry average of 8.6%.

View our latest analysis for TCECUR Sweden

Historical performance is a great place to start when researching a stock so above you can see the gauge for TCECUR Sweden's ROCE against it's prior returns. 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.

The Trend Of ROCE

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 0.9% which is a sight for sore eyes. In addition to that, TCECUR Sweden is employing 196% more capital than previously which is expected of a company that's trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

In Conclusion...

In summary, it's great to see that TCECUR Sweden has managed to break into profitability and is continuing to reinvest in its business. Considering the stock has delivered 40% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

One more thing to note, we've identified 1 warning sign with TCECUR Sweden and understanding it should be part of your investment process.

While TCECUR Sweden isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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.