Yahoo Finance Investors Should Be Encouraged By Bucher Industries' (VTX:BUCN) Returns On Capital
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. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at the ROCE trend of Bucher Industries (VTX:BUCN) we really liked what we saw.
What Is Return On Capital Employed (ROCE)?
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 Bucher Industries is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.23 = CHF430m ÷ (CHF3.0b - CHF1.1b) (Based on the trailing twelve months to December 2022).
So, Bucher Industries has an ROCE of 23%. In absolute terms that's a great return and it's even better than the Machinery industry average of 15%.
View our latest analysis for Bucher Industries
In the above chart we have measured Bucher Industries' prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Bucher Industries.
How Are Returns Trending?
Bucher Industries has not disappointed with their ROCE growth. The figures show that over the last five years, ROCE has grown 85% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.
What We Can Learn From Bucher Industries' ROCE
To sum it up, Bucher Industries is collecting higher returns from the same amount of capital, and that's impressive. Considering the stock has delivered 16% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.
If you want to know some of the risks facing Bucher Industries we've found 3 warning signs (2 are a bit unpleasant!) that you should be aware of before investing here.
If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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