Investors Will Want NV Bekaert's (EBR:BEKB) Growth In ROCE To Persist

Simply Wall St · 10/18 04:24

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, NV Bekaert (EBR:BEKB) looks quite promising in regards to its trends of return on capital.

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

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on NV Bekaert is:

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

0.13 = €368m ÷ (€4.2b - €1.3b) (Based on the trailing twelve months to June 2024).

Therefore, NV Bekaert has an ROCE of 13%. On its own, that's a standard return, however it's much better than the 8.9% generated by the Metals and Mining industry.

Check out our latest analysis for NV Bekaert

roce
ENXTBR:BEKB Return on Capital Employed October 18th 2024

In the above chart we have measured NV Bekaert's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for NV Bekaert .

So How Is NV Bekaert's ROCE Trending?

NV Bekaert has not disappointed with their ROCE growth. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 63% over the last five years. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

The Key Takeaway

In summary, we're delighted to see that NV Bekaert has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 50% return over the last five years. In light of that, we think it's worth looking further into this stock because if NV Bekaert can keep these trends up, it could have a bright future ahead.

If you'd like to know about the risks facing NV Bekaert, we've discovered 1 warning sign that you should be aware of.

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