To find multibagger stocks, what are the fundamental trends of companies? One common approach is to look for companies that: Return value Capital employed increasing with growth (ROCE) amount of capital employed. After all, this shows that this is a business that is increasing its profitability and reinvesting its profits. Taking this into consideration, I found that CIE Automotive (BME:CIE) and its ROCE trend, we weren't exactly thrilled.
About Return on Capital Employed (ROCE)
In case you aren't familiar, ROCE is a metric that measures how much pre-tax profit (as a percentage) a company earns on the capital invested in its business. Analysts use the following formula to calculate CIE Automotive.
Return on Capital Employed = Earnings before interest and tax (EBIT) ÷ (Total assets – Current liabilities)
0.15 = 471 million euros ÷ (3.6 billion euros – 384 million euros) (Based on the previous 12 months to September 2023).
therefore, CIE Automotive's ROCE is 15%. While this is a standard return in itself, it is much better than the 9.2% generated by the auto parts industry.
Check out our latest analysis for CIE Automotive.
Above you can see how CIE Automotive's current ROCE compares to its previous return on equity, but history can only tell us so much. If you're interested, take a look at our analyst forecasts. free A report on analyst forecasts for a company.
What does CIE Automotive's ROCE trend indicate?
When it comes to CIE Automotive's historical ROCE movement, the trend is not great. Over the past five years, his return on capital has fallen to 15% from 21% five years ago. On the other hand, the company is deploying more capital without seeing any improvement in sales over the last year, which could suggest that these investments are a long-term strategy. It's worth keeping an eye on the company's earnings going forward to see if these investments ultimately contribute to its bottom line.
Our take on CIE Automotive's ROCE
To summarize, CIE Automotive is reinvesting money into the business for growth, but unfortunately it doesn't seem like sales are increasing that much yet. Investors may also be aware of this trend, as the company's stock has only returned a total of 15% to shareholders over the past five years. Therefore, if you are looking for a multibagger, you may want to consider other options.
On another note, we discovered that 1 warning sign for CIE Automotive You probably want to know.
CIE Automotive may not be the most profitable company right now, but we've compiled a list of companies that are currently generating a return on equity of 25% or higher.check this out free I'll list them 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 using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
