To identify the next multibagger, there are some key trends to watch. Ideally, businesses exhibit two trends.grow first return Capital Employed (ROCE), and second, is increasing amount of capital used. Ultimately, this is a business that reinvests profits while increasing profitability.In light of that, the trends we are seeing are Sensirion Holdings (VTX:SENS) looks very promising, so let’s take a look.
Understanding Return on Capital Employed (ROCE)
For those who don’t know what ROCE is, it measures the amount of pre-tax profit a company can generate from the capital it uses in its operations. The formula for this at Sensirion Holding is:
Return on Capital Employed = Earnings Before Interest and Taxes (EBIT) ÷ (Total Assets – Current Liabilities)
0.28 = CHF80m ÷ (CHF333m – CHF44m) (Based on the last 12 months to June 2022).
therefore, Sensirion Holding’s ROCE is 28%. In absolute terms, this is a significant return, even better than the electronics industry average of 19%.
Check out Sensirion Holding’s latest analysis
In the chart above, we measured Sensirion Holding’s previous ROCE relative to its previous performance, but arguably the future is more important. If you want, you can find the analyst’s forecasts covering Sensirion Holding here. freedom.
ROCE trends
I like Sensirion Holding’s trends. Over the past four years, the return on capital employed has risen significantly to his 28%. Fundamentally, businesses are earning more for every dollar of capital invested, plus they are hiring 53% more capital. 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.
Sensirion Holding’s ROCE Conclusion
In summary, Sensirion Holding has proven that it can reinvest in its business and generate higher returns on the capital used. This is great. The stock has performed very well over the past three years, and investors have explained these patterns. So, with the stock price proving to be showing promising trends, it’s worth investigating the company further to see if those trends are likely to persist.
One more thing to note. two warning signs Understanding these should be part of the investment process.
Sensirion Holding isn’t the only company with high returns.Check us out if you want to see more freedom List of companies with solid fundamentals and strong return on equity.
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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 …
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