Yahoo Finance Returns Are Gaining Momentum At Bastei Lübbe (ETR:BST)
If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, we've noticed some promising trends at Bastei Lübbe (ETR:BST) so let's look a bit deeper.
Understanding 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. To calculate this metric for Bastei Lübbe, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.19 = €14m ÷ (€113m - €43m) (Based on the trailing twelve months to December 2023).
Thus, Bastei Lübbe has an ROCE of 19%. On its own, that's a standard return, however it's much better than the 7.6% generated by the Media industry.
View our latest analysis for Bastei Lübbe
Above you can see how the current ROCE for Bastei Lübbe 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 analyst report for Bastei Lübbe .
The Trend Of ROCE
The trends we've noticed at Bastei Lübbe are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 19%. 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 35%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.
What We Can Learn From Bastei Lübbe's ROCE
All in all, it's terrific to see that Bastei Lübbe is reaping the rewards from prior investments and is growing its capital base. And a remarkable 293% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.
Bastei Lübbe does have some risks, we noticed 3 warning signs (and 1 which is significant) we think you should know about.
While Bastei Lübbe may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.
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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.
