Finding a business with significant growth potential is not easy, but it can be done by looking at a few key financial metrics. Above all, next he would like to see two things.first growth return Capital Employed (ROCE), and secondly, company expansion amount of capital used. Ultimately, this is a business that reinvests profits while increasing profitability. With that in mind, ROCE Guillemot (EPA:GUI) looks great, so let’s see what the trends tell us.
Return on Capital Employed (ROCE): What is it?
For those of you who don’t know, ROCE is a measure of a company’s annual pre-tax earnings (earnings) relative to the capital used in the business. To calculate this metric for Guillemot, use the following formula:
Return on Capital Employed = Earnings Before Interest and Taxes (EBIT) ÷ (Total Assets – Current Liabilities)
0.41 = 45 million euros ÷ (181 million euros – 71 million euros) (Based on the last 12 months to June 2022).
therefore, Guillemot’s ROCE is 41%. In absolute terms, it’s a great return, even better than the tech industry average of 7.2%.
See Guillemo’s latest analysis
In the chart above, we measured Guillemot’s previous ROCE relative to his previous performance, but the future is arguably more important. See the analyst’s predictions if you’re interested. freedom A report on the company’s analyst forecasts.
What is the return trend?
Investors will be pleased with what is happening at Guillemot. The figures show that over the past five years, the revenue generated from the capital used has increased significantly by 41%. The company has effectively increased its profit per dollar of capital used and, notably, the amount of capital he has also increased by 185%. This could indicate that there are plenty of opportunities to invest capital internally, and at ever higher rates. This is a common combination among multibaggers.
A company that can generate a high return on capital and be consistently reinvested is a very popular trait and Guillemot has it. And a staggering 173% total return over the past five years suggests that investors expect better things to come in the future. With that in mind, if Guillemot can sustain these trends, we believe the stock deserves further consideration as it could have a bright future ahead.
Finally we found Guillemot’s two warning signs We think you should know
If you want to see other companies making high returns, go here freedom Here’s a list of companies with solid balance sheets and high earnings.
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This article by Simply Wall St is general in nature. We provide comments based on historical data and analyst projections using only unbiased methodologies and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. We aim to deliver long-term focused analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Is not …