There's Been No Shortage Of Growth Recently For CETIS Graphic and Documentation Services d.d's (LJSE:CETG) Returns On Capital

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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, we've noticed some promising trends at CETIS Graphic and Documentation Services d.d (LJSE:CETG) so let's look a bit deeper.

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. 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)

0.13 = €6.9m ÷ (€68m - €14m) (Based on the trailing twelve months to December 2020).

Therefore, CETIS Graphic and Documentation Services d.d has an ROCE of 13%. On its own, that's a standard return, however it's much better than the 11% generated by the Commercial Services industry.

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

Historical performance is a great place to start when researching a stock so above you can see the gauge for CETIS Graphic and Documentation Services d.d's ROCE against it's prior returns. If you're interested in investigating CETIS Graphic and Documentation Services d.d's past further, check out 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?

Investors would be pleased with what's happening at CETIS Graphic and Documentation Services d.d. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 13%. Basically the business is earning more per dollar of capital invested and in addition to that, 34% more capital is being employed now too. 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.

The Bottom Line

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. Since the stock has returned a staggering 171% to shareholders over the last five years, it looks like investors are recognizing these changes. 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 1 warning sign that our analysis has discovered.

While CETIS Graphic and Documentation Services d.d 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.

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.

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