Does CETIS Graphic and Documentation Services d.d (LJSE:CETG) Have The Makings Of A Multi-Bagger?

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in CETIS Graphic and Documentation Services d.d's (LJSE:CETG) returns on capital, so let's have a look.

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. To calculate this metric for CETIS Graphic and Documentation Services d.d, this is the formula:

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

0.11 = €5.1m ÷ (€65m - €17m) (Based on the trailing twelve months to December 2019).

So, CETIS Graphic and Documentation Services d.d has an ROCE of 11%. That's a relatively normal return on capital, and it's around the 10% generated by the Commercial Services industry.

Check out our latest analysis for CETIS Graphic and Documentation Services d.d

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 CETIS Graphic and Documentation Services d.d has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For CETIS Graphic and Documentation Services d.d Tell Us?

CETIS Graphic and Documentation Services d.d is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 11%. The amount of capital employed has increased too, by 38%. So we're very much inspired by what we're seeing at CETIS Graphic and Documentation Services d.d thanks to its ability to profitably reinvest capital.

In Conclusion...

In summary, it's great to see that CETIS Graphic and Documentation Services d.d can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And a remarkable 131% total return over the last five years tells us that investors are expecting more good things to come in the future. 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.

If you want to continue researching CETIS Graphic and Documentation Services d.d, you might be interested to know about the 2 warning signs that our analysis has discovered.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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