Return Trends At Voltalia (EPA:VLTSA) Aren't Appealing

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. 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. Having said that, from a first glance at Voltalia (EPA:VLTSA) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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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. Analysts use this formula to calculate it for Voltalia:

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

0.022 = €68m ÷ (€4.0b - €850m) (Based on the trailing twelve months to December 2024).

So, Voltalia has an ROCE of 2.2%. Ultimately, that's a low return and it under-performs the Renewable Energy industry average of 5.1%.

View our latest analysis for Voltalia

Above you can see how the current ROCE for Voltalia compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Voltalia .

How Are Returns Trending?

In terms of Voltalia's historical ROCE trend, it doesn't exactly demand attention. The company has employed 123% more capital in the last five years, and the returns on that capital have remained stable at 2.2%. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

Our Take On Voltalia's ROCE

Long story short, while Voltalia has been reinvesting its capital, the returns that it's generating haven't increased. And in the last five years, the stock has given away 47% so the market doesn't look too hopeful on these trends strengthening any time soon. Therefore based on the analysis done in this article, we don't think Voltalia has the makings of a multi-bagger.

Like most companies, Voltalia does come with some risks, and we've found 1 warning sign that you should be aware of.

While Voltalia 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.