The Return Trends At Thunderful Group (STO:THUNDR) Look Promising

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. So on that note, Thunderful Group (STO:THUNDR) looks quite promising in regards to its trends of return on capital.

Understanding Return On Capital Employed (ROCE)

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. The formula for this calculation on Thunderful Group is:

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

0.095 = kr230m ÷ (kr3.6b - kr1.2b) (Based on the trailing twelve months to December 2021).

So, Thunderful Group has an ROCE of 9.5%. In absolute terms, that's a low return but it's around the Electronic industry average of 11%.

Check out our latest analysis for Thunderful Group

Above you can see how the current ROCE for Thunderful Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Thunderful Group here for free.

The Trend Of ROCE

We're glad to see that ROCE is heading in the right direction, even if it is still low at the moment. Over the last two years, returns on capital employed have risen substantially to 9.5%. The amount of capital employed has increased too, by 299%. So we're very much inspired by what we're seeing at Thunderful Group thanks to its ability to profitably reinvest capital.

On a related note, the company's ratio of current liabilities to total assets has decreased to 34%, which basically reduces it's funding from the likes of short-term creditors or suppliers. Therefore we can rest assured that the growth in ROCE is a result of the business' fundamental improvements, rather than a cooking class featuring this company's books.

Our Take On Thunderful Group's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Thunderful Group has. Astute investors may have an opportunity here because the stock has declined 49% in the last year. So researching this company further and determining whether or not these trends will continue seems justified.

One more thing: We've identified 2 warning signs with Thunderful Group (at least 1 which shouldn't be ignored) , and understanding them would certainly be useful.

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

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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.