Under The Bonnet, Maven Wireless Sweden's (STO:MAVEN) Returns Look Impressive

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. And in light of that, the trends we're seeing at Maven Wireless Sweden's (STO:MAVEN) look very promising so lets take a look.

What Is Return On Capital Employed (ROCE)?

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 Maven Wireless Sweden:

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

0.30 = kr38m ÷ (kr179m - kr49m) (Based on the trailing twelve months to March 2024).

Therefore, Maven Wireless Sweden has an ROCE of 30%. In absolute terms that's a great return and it's even better than the Communications industry average of 14%.

Check out our latest analysis for Maven Wireless Sweden

Above you can see how the current ROCE for Maven Wireless Sweden compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Maven Wireless Sweden .

What Does the ROCE Trend For Maven Wireless Sweden Tell Us?

Maven Wireless Sweden has recently broken into profitability so their prior investments seem to be paying off. About five years ago the company was generating losses but things have turned around because it's now earning 30% on its capital. In addition to that, Maven Wireless Sweden is employing 289% more capital than previously which is expected of a company that's trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

The Key Takeaway

To the delight of most shareholders, Maven Wireless Sweden has now broken into profitability. Investors may not be impressed by the favorable underlying trends yet because over the last three years the stock has only returned 22% to shareholders. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

If you'd like to know more about Maven Wireless Sweden, we've spotted 2 warning signs, and 1 of them shouldn't be ignored.

Maven Wireless Sweden 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.