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Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. However, after briefly looking over the numbers, we don't think B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653 (AMS:PORF) has the makings of a multi-bagger going forward, but let's have a look at why that may be.
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. Analysts use this formula to calculate it for B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.015 = €505k ÷ (€37m - €3.6m) (Based on the trailing twelve months to June 2024).
So, B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653 has an ROCE of 1.5%. Ultimately, that's a low return and it under-performs the Consumer Durables industry average of 9.1%.
Check out our latest analysis for B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653
While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653's past further, check out this free graph covering B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653's past earnings, revenue and cash flow.
What Can We Tell From B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653's ROCE Trend?
There hasn't been much to report for B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653's returns and its level of capital employed because both metrics have been steady for the past five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So unless we see a substantial change at B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653 in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.
The Key Takeaway
In a nutshell, B.V. Delftsch Aardewerkfabriek De Porceleyne Fles Anno 1653 has been trudging along with the same returns from the same amount of capital over the last five years. Unsurprisingly, the stock has only gained 19% over the last five years, which potentially indicates that investors are accounting for this going forward. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.