Investors Will Want Bowler Metcalf's (JSE:BCF) Growth In ROCE To Persist

Simply Wall St · 03/13 04:05

There are a few key trends to look for if we want to identify the next multi-bagger. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at Bowler Metcalf (JSE:BCF) and its trend of ROCE, we really liked what we saw.

What Is 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. To calculate this metric for Bowler Metcalf, this is the formula:

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

0.15 = R133m ÷ (R954m - R78m) (Based on the trailing twelve months to December 2024).

Therefore, Bowler Metcalf has an ROCE of 15%. That's a pretty standard return and it's in line with the industry average of 15%.

Check out our latest analysis for Bowler Metcalf

roce
JSE:BCF Return on Capital Employed March 13th 2025

Historical performance is a great place to start when researching a stock so above you can see the gauge for Bowler Metcalf's ROCE against it's prior returns. If you'd like to look at how Bowler Metcalf has performed in the past in other metrics, you can view this free graph of Bowler Metcalf's past earnings, revenue and cash flow.

So How Is Bowler Metcalf's ROCE Trending?

Bowler Metcalf is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 15%. The amount of capital employed has increased too, by 27%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

Our Take On Bowler Metcalf'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 Bowler Metcalf has. Since the stock has returned a staggering 132% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Bowler Metcalf can keep these trends up, it could have a bright future ahead.

One final note, you should learn about the 4 warning signs we've spotted with Bowler Metcalf (including 1 which is a bit unpleasant) .

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