Investors Will Want Maven Wireless Sweden's (STO:MAVEN) Growth In ROCE To Persist

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at Maven Wireless Sweden (STO:MAVEN) so let's look a bit deeper.

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

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Maven Wireless Sweden:

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

0.19 = kr21m ÷ (kr152m - kr45m) (Based on the trailing twelve months to September 2023).

Thus, Maven Wireless Sweden has an ROCE of 19%. In absolute terms, that's a satisfactory return, but compared to the Communications industry average of 15% it's much better.

View our latest analysis for Maven Wireless Sweden

Historical performance is a great place to start when researching a stock so above you can see the gauge for Maven Wireless Sweden's ROCE against it's prior returns. If you're interested in investigating Maven Wireless Sweden's past further, check out this free graph covering Maven Wireless Sweden's past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

The fact that Maven Wireless Sweden is now generating some pre-tax profits from its prior investments is very encouraging. The company was generating losses four years ago, but now it's earning 19% which is a sight for sore eyes. Not only that, but the company is utilizing 242% more capital than before, but that's to be expected from a company trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

On a related note, the company's ratio of current liabilities to total assets has decreased to 30%, which basically reduces it's funding from the likes of short-term creditors or suppliers. So this improvement in ROCE has come from the business' underlying economics, which is great to see.

In Conclusion...

In summary, it's great to see that Maven Wireless Sweden has managed to break into profitability and is continuing to reinvest in its business. And with a respectable 16% awarded to those who held the stock over the last year, you could argue that these developments are starting to get the attention they deserve. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

One final note, you should learn about the 3 warning signs we've spotted with Maven Wireless Sweden (including 1 which is a bit concerning) .

While Maven Wireless Sweden 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.