Returns On Capital Are A Standout For Intellego Technologies (STO:INT)

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, the ROCE of Intellego Technologies (STO:INT) looks great, so lets see what the trend can tell us.

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. Analysts use this formula to calculate it for Intellego Technologies:

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

0.32 = kr60m ÷ (kr238m - kr52m) (Based on the trailing twelve months to September 2023).

Therefore, Intellego Technologies has an ROCE of 32%. In absolute terms that's a great return and it's even better than the Electronic industry average of 19%.

View our latest analysis for Intellego Technologies

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 Intellego Technologies has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What Can We Tell From Intellego Technologies' ROCE Trend?

Intellego Technologies has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses three years ago, but now it's earning 32% which is a sight for sore eyes. In addition to that, Intellego Technologies is employing 4,441% 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.

The Key Takeaway

To the delight of most shareholders, Intellego Technologies has now broken into profitability. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 39% return over the last year. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you'd like to know more about Intellego Technologies, we've spotted 4 warning signs, and 1 of them is significant.

Intellego Technologies is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.