Returns At Big Technologies (LON:BIG) Are On The Way Up
If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, we've noticed some promising trends at Big Technologies (LON:BIG) so let's look a bit deeper.
Return On Capital Employed (ROCE): What Is It?
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 Big Technologies is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.15 = UK£13m ÷ (UK£98m - UK£9.0m) (Based on the trailing twelve months to June 2022).
Therefore, Big Technologies has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 8.2% generated by the Commercial Services industry.
Check out our latest analysis for Big Technologies
Above you can see how the current ROCE for Big Technologies compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Big Technologies.
So How Is Big Technologies' ROCE Trending?
Investors would be pleased with what's happening at Big Technologies. Over the last three years, returns on capital employed have risen substantially to 15%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 235%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.
Our Take On Big Technologies' 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 Big Technologies has. Investors may not be impressed by the favorable underlying trends yet because over the last year the stock has only returned 2.8% to shareholders. So with that in mind, we think the stock deserves further research.
Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation that compares the share price and estimated value.
If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.
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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.
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