Did you know that there are financial metrics that can provide clues to a potential multi-bagger? Typically, we will want to notice a growth trend to return to on capital employed (ROCE) and at the same time, a based capital employed. This shows us that it is a compounding machine, capable of continuously reinvesting its profits back into the business and generating higher returns. In light of this, when we looked Baikowski (EPA:ALBKK) and its ROCE trend, we weren’t exactly thrilled.

Return on capital employed (ROCE): what is it?

If you’ve never worked with ROCE before, it measures the “yield” (pre-tax profit) a company generates from the capital used in its business. Analysts use this formula to calculate it for Baikowski:

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

0.094 = €4.6m ÷ (€67m – €18m) (Based on the last twelve months to June 2021).

Thereby, Baikowski has a ROCE of 9.4%. In absolute terms, this is a low yield, but it is far better than the chemical industry average of 7.8%.

See our latest analysis for Baikowski

Although the past is not indicative of the future, it can be useful to know the historical performance of a company, which is why we have this graph above. If you want to see how Baikowski has performed in the past in other metrics, you can see this free chart of past profits, revenue and cash flow.

So what is Baikowski’s ROCE trend?

When we looked at the ROCE trend at Baikowski, we didn’t gain much confidence. Over the past four years, capital returns have declined to 9.4% from 13% four years ago. However, it looks like Baikowski could reinvest for long-term growth because while capital employed has increased, the company’s sales haven’t changed much over the past 12 months. It’s worth keeping an eye on the company’s earnings going forward to see if those investments end up contributing to the bottom line.

The essential

In summary, Baikowski is reinvesting funds into the business for growth, but unfortunately, it appears sales haven’t grown much yet. Considering the stock has gained an impressive 29% over the past three years, investors must be thinking there are better things to come. But if the trajectory of these underlying trends continues, we think the likelihood of it being a multi-bagger from here is not high.

One last note, you should inquire about the 3 warning signs we spotted some with Baikowski (including 1 which is a bit unpleasant).

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

Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

BRANFORD, Conn., March 03, 2022 (GLOBE NEWSWIRE) — Sachem Capital Corp. (NYSE American: SACH) Announces the Pricing of a Registered Public Offering of $50.0 Million Aggregate Principal Amount of 6.00% Unsecured and Unsubordinated Notes Due Five Years from the Date issue (“Notes”). The net proceeds of the offering to Sachem Capital Corp. is expected to be approximately $48.2 million after payment of underwriting discounts and commissions and estimated offering costs payable by Sachem Capital Corp.

The offering is expected to close on March 9, 2022, subject to customary closing conditions. Sachem Capital Corp. granted the underwriters a 30-day option to purchase up to an additional aggregate principal amount of $7.5 million of notes to cover over-allotments, if any.

Notes will be graded past bet with all unsecured and unsubordinated debt of the company, whether currently outstanding or issued in the future. The Notes are expected to list on the NYSE American under the symbol “SCCE” and begin trading on or about March 10, 2022.

The Notes will mature on March 30, 2027 and may be redeemed, in whole or in part, at any time or from time to time, at the Company’s option beginning on March 9, 2024. Interest on the Notes will accrue at the rate annual rate of 6.00% and will be payable quarterly, in arrears, on March 30, June 30, September 30 and December 30 during which the Notes are outstanding, commencing on June 30, 2022.

The Notes have a private credit rating of BBB+ assigned by Egan-Jones Ratings Company, an independent, unaffiliated rating agency. Egan-Jones is a nationally recognized statistical rating organization and is recognized by the National Association of Insurance Commissioners as a credit rating provider. Egan-Jones is also certified by the European Securities and Markets Authority. A security rating is not a recommendation to buy, sell or hold any security and may be subject to revision or withdrawal at any time.

Ladenburg Thalmann & Co. Inc., Janney Montgomery Scott LLC, InspereX LLC and William Blair & Company, LLC are acting as joint bookrunners for the offering. Colliers Securities LLC is acting as co-manager of the offering.

This press release does not constitute an offer to sell or the solicitation of an offer to buy the securities of this offer or any other securities, nor will there be any sale of the Notes or any other securities. mentioned in this press release in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such state or jurisdiction.

A registration statement relating to, among other things, the Notes has been filed with and declared effective by the Securities and Exchange Commission. The offering is being made only by means of a related prospectus supplement and an accompanying base prospectus forming part of the effective registration statement, copies of which may be obtained, when available, from from: Ladenburg Thalmann & Co. Inc. upon written request to Syndicate Department, 640 5th Avenue, 4th Floor, New York, NY 10019 (telephone number 1-800-573-2541) or by sending e-mail to prospectus @ladenburg.com; Janney Montgomery Scott LLC, by written request to 1717 Arch Street Philadelphia, PA 19103 (phone number 1-800-526-6397) or by emailing prospectus@janney.com; or InspereX LLC, Attn: Syndicate Department, 200 S. Wacker Drive, Suite 3400, Chicago, IL 60606 (phone number 1-800-327-1546) or by emailing prospectus_requests@insperex.com; or William Blair & Company, LLC upon written request to 150 North Riverside Plaza, Chicago, Illinois 60606 (phone number 1-800-621-0687) or by emailing prospectus@williamblair.com. Copies may also be obtained free of charge by visiting EDGAR on the SEC’s website at http://www.sec.gov.

Sachem Capital Corp. has filed a preliminary prospectus supplement, dated March 3, 2022, with the Securities and Exchange Commission which contains a more detailed description of the Notes and the terms of the offering. The preliminary prospectus supplement, dated March 3, 2022, and the accompanying base prospectus, dated February 25, 2022, which contain other important information about Sachem Capital Corp., should be read carefully before investing in the tickets. Investors are urged to carefully consider their personal investment objectives, the risks relating to Sachem Capital Corp., generally, and the Notes in particular, and other matters relating to Sachem Capital Corp., its business, operations and its financial situation, before investing in the notes.

About Sachem Capital Corp.

Sachem Capital Corp. specializes in the origination, underwriting, financing, servicing and management of a portfolio of first mortgage loans. It offers short-term (i.e. three years or less) secured non-bank loans (sometimes referred to as “hard money” loans) to property investors to finance the acquisition, renovation, development, rehabilitation or improvement of properties located primarily in Connecticut. . The company does not lend to owner occupiers. The company’s primary underwriting criteria is a conservative loan-to-value ratio. The properties securing the Company’s loans are generally classified as residential or commercial real estate and are generally held for the purpose of resale or investment. Each loan is secured by a first ranking mortgage on real estate. Each loan is also personally guaranteed by the principal(s) of the borrower, which security may be secured as security by a pledge of the guarantor’s interest in the borrower. The company also makes opportunistic real estate purchases outside of its lending business. The company believes that it qualifies as a real estate investment trust (REIT) for federal income tax purposes and has elected to be taxed as a REIT beginning with its 2017 tax year.

Forward-looking statements

This press release may contain forward-looking statements. All statements other than statements of historical facts contained in this press release, including statements regarding our future operating results and financial condition, our strategy and plans, and our expectations for future operations, are statements prospective. The words “anticipate”, “estimate”, “expect”, “project”, “plan”, “seek”, “intend”, “believe”, “may”, “might”, ” will”, “should”, “could”, “likely”, “continue”, “design” and the negative form of these terms and other similar words and phrases are intended to identify forward-looking statements.

We have based these forward-looking statements largely on our current expectations and projections regarding future events and trends that we believe may affect our financial condition, results of operations, strategy, operations and business objectives in the near and future. long term and our financial needs. These forward-looking statements are subject to several risks, uncertainties and assumptions, as described in our 2020 Annual Report on Form 10-K filed with the United States Securities and Exchange Commission on March 31, 2021. Due to these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this press release may not occur, and actual results may differ materially and adversely from those anticipated or implied by the forward-looking statements.

You should not rely on forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Further, neither we nor any other person assumes responsibility for the accuracy and completeness of such forward-looking statements. We disclaim any obligation to update any of these forward-looking statements.

All forward-looking statements attributable to us are expressly qualified in their entirety by these and other cautionary statements made in this press release. You should evaluate all forward-looking statements made by us in the context of these risks and uncertainties.

Investor and media contact:
Crescendo Communications, LLC
Email: sach@crescendo-ir.com
Tel: (212) 671-1021

If we want to find a potential multi-bagger, there are often underlying trends that can provide clues. Typically, we will want to notice a growth trend to return to on capital employed (ROCE) and at the same time, a based capital employed. Basically, this means that a business has profitable initiatives that it can continue to reinvest in, which is a hallmark of a blending machine. However, after investigating Clas Ohlson (STO:CLAS B), we don’t think current trends fit the mold of a multi-bagger.

Understanding return on capital employed (ROCE)

If you’ve never worked with ROCE before, it measures the “yield” (pre-tax profit) a company generates from the capital used in its business. Analysts use this formula to calculate it for Clas Ohlson:

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

0.17 = 622 million kr ÷ (6.4 billion kr – 2.7 billion kr) (Based on the last twelve months to October 2021).

Thereby, Clas Ohlson has a ROCE of 17%. By itself, that’s a standard return, but it’s far better than the 12% generated by the specialty retail industry.

See our latest analysis for Clas Ohlson

In the chart above, we measured Clas Ohlson’s past ROCE against his past performance, but the future is arguably more important. If you want to see what analysts are predicting for the future, you should check out our free report for Clas Ohlson.

What does Clas Ohlson’s ROCE trend tell us?

In terms of Clas Ohlson’s historic ROCE moves, the trend isn’t fantastic. About five years ago the return on capital was 28%, but since then it has fallen to 17%. Meanwhile, the company is using more capital, but that hasn’t changed much in terms of sales over the past 12 months, so that could reflect longer-term investments. It may take some time before the company begins to see a change in the income from these investments.

Furthermore, Clas Ohlson’s current liabilities are still quite high at 42% of total assets. This effectively means that suppliers (or short-term creditors) finance a large part of the business, so just be aware that this may introduce some elements of risk. Although this is not necessarily a bad thing, it can be beneficial if this ratio is lower.

The Key Takeaway

In summary, while we are somewhat encouraged by Clas Ohlson’s reinvestment in his own business, we are aware that returns are diminishing. And investors may recognize these trends since the stock has only returned 0.2% to shareholders in total over the past five years. So if you’re looking for a multi-bagger, we think you’d have better luck elsewhere.

One more thing we spotted 3 warning signs facing Clas Ohlson which might interest you.

Although Clas Ohlson isn’t currently generating the highest returns, we’ve compiled a list of companies that are currently generating over 25% return on equity. look at this free list here.

Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

Finding a business that has the potential to grow significantly isn’t easy, but it is possible if we look at a few key financial metrics. Typically, we will want to notice a growth trend to return to on capital employed (ROCE) and at the same time, a based capital employed. Ultimately, this demonstrates that this is a company that reinvests its earnings at increasing rates of return. However, after investigating Atlas Technical Consultants (NASDAQ:ATCX), we don’t think current trends fit the mold of a multi-bagger.

What is return on capital employed (ROCE)?

Just to clarify if you’re not sure, ROCE is a measure of the pre-tax income (as a percentage) that a business earns on the capital invested in its business. The formula for this calculation on Atlas Technical Consultants is:

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

0.045 = $16 million ÷ ($420 million – $66 million) (Based on the last twelve months to October 2021).

Thereby, Atlas Technical Consultants has a ROCE of 4.5%. Ultimately, that’s a poor performer, and it’s below the professional services industry average of 11%.

See our latest analysis for Atlas Technical Consultants

In the chart above, we measured Atlas Technical Consultants’ past ROCE against its past performance, but the future is arguably more important. If you wish, you can view forecasts from analysts covering Atlas Technical Consultants here for free.

What does the ROCE trend tell us for Atlas Technical Consultants?

At first glance, the ROCE trend at Atlas Technical Consultants does not inspire confidence. Over the past three years, capital returns have declined to 4.5% from 6.1% three years ago. However, given that capital employed and revenue have both increased, it appears that the company is currently continuing to grow, following short-term returns. If these investments prove successful, it can bode very well for long-term stock performance.

The Key Takeaway

While returns have fallen for Atlas Technical Consultants lately, we are encouraged to see that sales are increasing and the company is reinvesting in its operations. These trends are beginning to be recognized by investors as the stock has delivered a 14% gain to shareholders who have held it over the past three years. Therefore, we recommend that you take a closer look at this stock to confirm if it has the makings of a good investment.

One last note, you should inquire about the 3 warning signs we spotted with Atlas Technical Consultants (including 1 essential).

While Atlas Tech Consultants don’t generate the highest return, check out this free list of companies that achieve high returns on equity with strong balance sheets.

Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

Did you know that there are financial metrics that can provide clues of a potential multi-bagger? First, we would like to identify a growth to return to on capital employed (ROCE) and at the same time, a based capital employed. Basically, this means that a business has profitable initiatives that it can continue to reinvest in, which is a hallmark of a blending machine. So when we looked at the ROCE trend of JB Hi-Fi (ASX:JBH) we really liked what we saw.

Return on capital employed (ROCE): what is it?

If you’ve never worked with ROCE before, it measures the “yield” (pre-tax profit) a company generates from the capital used in its business. To calculate this metric for JB Hi-Fi, here is the formula:

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

0.35 = AU$705 million ÷ (AU$3.8 billion – AU$1.8 billion) (Based on the last twelve months to December 2021).

So, JB Hi-Fi has a ROCE of 35%. In absolute terms, that’s an excellent return and even better than the specialty retail industry average of 20%.

See our latest review for JB Hi-Fi

In the chart above, we measured JB Hi-Fi’s past ROCE against its past performance, but the future is arguably more important. If you want to see what analysts are predicting for the future, you should check out our free report for JB Hi-Fi.

What does the ROCE trend tell us for JB Hi-Fi?

Investors would be thrilled with what’s happening at JB Hi-Fi. Data shows that capital returns have increased significantly over the past five years to 35%. The company is actually making more money per dollar of capital employed, and it’s worth noting that the amount of capital has also increased by 41%. So we’re very inspired by what we’re seeing at JB Hi-Fi with its ability to reinvest capital profitably.

On a separate but related note, it’s important to know that JB Hi-Fi has a current liabilities to total assets ratio of 48%, which we would consider quite high. This may entail certain risks, since the business is essentially dependent on its suppliers or other types of short-term creditors. Ideally, we would like this to decrease, as this would mean fewer risky bonds.

The essential

In summary, JB Hi-Fi has proven that it can reinvest in the business and generate higher returns on that capital employed, which is great. Given that the stock has returned 153% to shareholders over the past five years, it seems investors recognize these changes. That being said, we still think the promising fundamentals mean the company merits further due diligence.

Since virtually every business faces risks, it’s worth knowing about them, and we’ve spotted 2 warning signs for JB Hi-Fi (1 of which is a little worrying!) that you should know about.

If you want to find more stocks that have generated high returns, check out this free list of stocks with strong balance sheets that also generate high returns on equity.

Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

If we want to find a potential multi-bagger, there are often underlying trends that can provide clues. Ideally, a business will show two trends; first growth to return to on capital employed (ROCE) and on the other hand, growth quantity capital employed. Simply put, these types of businesses are slot machines, meaning they continually reinvest their profits at ever-higher rates of return. However, after briefly looking at the numbers, we don’t think American (NYSE: AEE) has the makings of a multi-bagger in the future, but let’s see why it may be.

Return on capital employed (ROCE): what is it?

For those who don’t know what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital used in its business. To calculate this metric for Ameren, here is the formula:

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

0.046 = $1.5 billion ÷ ($35 billion – $2.4 billion) (Based on the last twelve months to September 2021).

So, Ameren posted a ROCE of 4.6%. Even though it’s in line with the industry average of 4.6%, it’s still a poor performer on its own.

See our latest analysis for Ameren

In the chart above, we measured Ameren’s past ROCE against its past performance, but the future is arguably more important. If you want, you can check out analyst forecasts covering Ameren here for free.

So, what is Ameren’s ROCE trend?

In terms of Ameren’s historic ROCE moves, the trend isn’t fantastic. Over the past five years, capital returns have declined to 4.6% from 6.3% five years ago. Meanwhile, the company is using more capital, but that hasn’t changed much in terms of sales over the past 12 months, so that could reflect longer-term investments. It’s worth keeping an eye on the company’s earnings going forward to see if those investments end up contributing to the bottom line.

Our take on Ameren’s ROCE

In summary, while we are somewhat encouraged by Ameren’s reinvestment in its own business, we are aware that returns are diminishing. Considering the stock has gained an impressive 84% over the past five years, investors must be thinking there are better things to come. However, unless these underlying trends turn more positive, we wouldn’t be too hopeful.

Ameren does come with some risks though, we have found 3 warning signs in our investment analysis, and 1 of them makes us a little uncomfortable…

Although Ameren isn’t currently making the highest returns, we’ve compiled a list of companies that are currently generating more than 25% return on equity. look at this free list here.

Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

Given the apparent end of the multi-trillion dollar government stimulus known as Quantitative Tapering (QT), interest rates have started to rise.

In fact, the yield on the 10-year US Treasury rose from 1.52% at the end of last year to 1.92%, an increase of 26.32%. With this in mind, we thought it appropriate to illustrate the impact this will most likely have on your bond portfolio.

Generally speaking, bonds are negotiable securities that can be bought and sold after their date of issue and before their date of maturity. With this in mind, the first fact that any investor in these fixed income securities should realize is that the price or value of a bond will react inversely to interest rates. As interest rates rise as they have so far this year, bond values ​​decline.

Conversely, if the recent rise reverses and rates fall, bond values ​​will rise.

As an example, suppose that on December 31, 2021, you invested $100,000 in a ten-year U.S. Treasury bond (both principal and interest payment guaranteed by the full faith and credit of the U.S. government widely accepted as the safest fixed income investments in the world). As detailed above, the going rate that day was around 1.52%, which meant that that $100,000 would earn $1,520 in interest, or $760 paid semi-annually, every year for ten years. . However, since then the yield has climbed to 1.92%.

Therefore, if you buy a bond now, you will receive annual interest payments of $1,920, paid semi-annually. Following the rise in interest rates, what happened to the interest payments and the value of the 1.52% note you purchased on December 31? Very briefly, the interest payments of $760 semi-annually will remain the same for the remainder of the life of the note or until it matures. However, the principal value of the bond, if you want to sell it before its maturity, has gone down. After all, who would give you $100,000 for a bond yielding 1.52% when they could now buy their own bond yielding 1.92%?

The answer, sensible person. You’re stuck receiving $1,520 per year for the rest of the life of the note rather than the $1,920 you would receive if you had waited for interest rates to rise a bit. The loss to you is $400 per year for the remainder of the term or nearly $4,000 in total income.

You can therefore conclude that your bond or your bond fund may fall in price or in net asset value. As there has been a mostly unbroken bull market in bonds for nearly forty years, it is important to reaffirm that bond prices react inversely to interest rates. When interest rates rise, bond values ​​fall and when interest rates fall, bond values ​​rise. With interest rates still near 50-year lows, the most likely direction for interest rates is up.

What should an investor do now? Be patient. Let’s see how the economy reacts to all this quantitative tightening. Let’s see how President Biden and his administration handle Congress, the economy, tax reform, the burgeoning deficit, trade, foreign policy, and geopolitical events.

Keep in mind that two of our main principles of investing are 1) asset allocation works best over the long term and 2) investing in bonds for income and stocks for growth. Try to stick to the middle part of the yield curve or bonds that mature between four and eight years. By doing so, you will receive more than half the interest of a thirty-year bond with much less principal risk if you wish to sell your bonds before maturity.

Please note that all data is for general information purposes only and does not constitute specific recommendations. The opinions of the authors do not constitute a recommendation to buy or sell the stocks, the bond market or any security contained therein. Securities involve risk and fluctuations in principal will occur. Please research any investment thoroughly before committing any money or consult your financial advisor. Please note that Fagan Associates, Inc. or related persons buy or sell securities for themselves which they also recommend to their clients. Consult your financial advisor before making any changes to your portfolio. To contact Fagan Associates, please call (518) 279-1044.

What trends should we look for if we want to identify stocks that can multiply in value over the long term? Among other things, we will want to see two things; first, growth to return to on capital employed (ROCE) and on the other hand, an expansion of the quantity capital employed. Ultimately, this demonstrates that this is a company that reinvests its earnings at increasing rates of return. Therefore, when we briefly examined Press Metal Aluminum Holdings Berhad’s (KLSE:PMETAL) ROCE trend, we were pretty happy with what we saw.

Return on capital employed (ROCE): what is it?

For those who don’t know what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital used in its business. The formula for this calculation on Press Metal Aluminum Holdings Berhad is:

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

0.16 = RM1.4b ÷ (RM13b – RM4.3b) (Based on the last twelve months to September 2021).

Thereby, Press Metal Aluminum Holdings Berhad has a ROCE of 16%. In itself, this is a standard return, but it is much better than the 12% generated by the metals and mining industry.

Check out our latest analysis for Press Metal Aluminum Holdings Berhad

In the chart above, we measured Press Metal Aluminum Holdings Berhad’s past ROCE against its past performance, but the future is arguably more important. If you want, you can check analyst forecasts covering Press Metal Aluminum Holdings Berhad here for free.

The ROCE trend

Although capital returns are good, they haven’t changed much. Over the past five years, ROCE has remained relatively stable at around 16% and the company has deployed 89% more capital into its operations. Since 16% is a moderate ROCE, it’s good to see that a company can continue to reinvest at these decent rates of return. Stable returns in this stage can be unexciting, but if they can be sustained over the long term, they often offer handsome rewards to shareholders.

Our view on Berhad’s Press Metal Aluminum Holdings ROCE

The main thing to remember is that Press Metal Aluminum Holdings Berhad has proven its ability to continually reinvest at respectable rates of return. And the stock has done incredibly well with a 488% return over the past five years, so long-term investors are no doubt pleased with this result. So while the positive underlying trends can be explained by investors, we still think this stock deserves further investigation.

Press Metal Aluminum Holdings Berhad poses some risks, however, and we have spotted 1 warning sign for Press Metal Aluminum Holdings Berhad that might interest you.

Although Press Metal Aluminum Holdings Berhad does not currently generate the highest returns, we have compiled a list of companies that currently generate more than 25% return on equity. look at this free list here.

Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

Did you know that there are financial metrics that can provide clues to a potential multi-bagger? Typically, we will want to notice a growth trend to return to on capital employed (ROCE) and at the same time, a based capital employed. Simply put, these types of businesses are slot machines, meaning they continually reinvest their profits at ever-higher rates of return. Therefore, when we looked at ROCE trends at Scotts Miracle-Gro (NYSE: SMG), we liked what we saw.

What is return on capital employed (ROCE)?

For those unaware, ROCE is a measure of a company’s annual pre-tax profit (yield), relative to the capital employed in the business. The formula for this calculation on Scotts Miracle-Gro is:

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

0.20 = $750 million ÷ ($4.8 billion – $1.1 billion) (Based on the last twelve months to September 2021).

So, Scotts Miracle-Gro has a 20% ROI. In absolute terms, this is an excellent return and is even better than the chemical industry average of 11%.

See our latest analysis for Scotts Miracle-Gro

Above, you can see how Scotts Miracle-Gro’s current ROCE compares to its past returns on capital, but there’s little you can say about the past. If you want to see what analysts predict for the future, you should check out our free report for Scotts Miracle-Gro.

What the ROCE trend can tell us

In terms of Scotts Miracle-Gro’s ROCE history, that’s pretty impressive. The company has consistently gained 20% over the past five years and the capital employed within the company has increased by 78% over this period. Now considering that the ROCE is an attractive 20%, this combination is actually quite attractive because it means the company can consistently put money to work and generate those high returns. If Scotts Miracle-Gro can continue like this, we would be very optimistic about its future.

Scotts Miracle-Gro ROCE Basics

In summary, we are pleased to see that Scotts Miracle-Gro has compounded returns by reinvesting at consistently high rates of return, as these are common characteristics of a multi-bagger. And since the stock has risen sharply over the past five years, it looks like the market might be expecting that trend to continue. So while the stock may be more “expensive” than it used to be, we believe the strong fundamentals warrant this stock for further research.

If you want to further research Scotts Miracle-Gro, you may be interested in learning more about the 1 warning sign that our analysis found.

If you want to find more stocks that have generated high returns, check out this free list of stocks with strong balance sheets that also generate high returns on equity.

Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

If we want to find a stock that could multiply over the long term, what are the underlying trends we should be looking for? First, we would like to identify a growth to return to on capital employed (ROCE) and at the same time, a based capital employed. If you see this, it usually means it’s a company with a great business model and lots of profitable reinvestment opportunities. So on that note, Zehnder Group (VTX:ZEHN) looks quite promising when it comes to its capital return trends.

Understanding return on capital employed (ROCE)

For those who don’t know what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital used in its business. Analysts use this formula to calculate it for Zehnder Group:

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

0.19 = €72m ÷ (€532m – €155m) (Based on the last twelve months to June 2021).

So, Zehnder Group has a ROCE of 19%. In absolute terms, that’s a pretty normal return, and it’s a bit close to the building industry average of 23%.

Discover our latest analysis for Zehnder Group

Above you can see how Zehnder Group’s current ROCE compares to its past returns on capital, but there is little you can say about the past. If you’re interested, you can check out analyst forecasts in our free analyst forecast report for the company.

What is the return trend?

Zehnder Group is promising given that its ROCE is trending up and to the right. Looking at the data, we can see that even though the capital employed in the business has remained relatively stable, the ROCE generated has increased by 173% over the past five years. Basically, the business generates higher returns from the same amount of capital and this is evidence that there are improvements in the efficiency of the business. It’s worth digging into this though, because while it’s great that the business is more efficient, it could also mean that in the future, areas to invest in internally for organic growth are lacking.

What we can learn from Zehnder Group’s ROCE

As noted above, Zehnder Group appears to be becoming more efficient at generating returns as capital employed has remained stable but earnings (before interest and taxes) are up. And since the stock has performed exceptionally well over the past five years, these trends are taken into account by investors. Therefore, we think it would be worth checking whether these trends will continue.

Before drawing any conclusions, we need to know what value we get for the current stock price. This is where you can view our FREE Intrinsic Value Estimate which compares the stock price and the estimated value.

Although Zehnder Group does not currently achieve the highest returns, we have compiled a list of companies that currently generate more than 25% return on equity. look at this free list here.

Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.