Yahoo Finance Basic-Fit (AMS:BFIT) Has More To Do To Multiply In Value Going Forward
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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. In light of that, when we looked at Basic-Fit (AMS:BFIT) and its ROCE trend, we weren't exactly thrilled.
Return On Capital Employed (ROCE): What Is It?
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Basic-Fit is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.032 = €85m ÷ (€3.2b - €561m) (Based on the trailing twelve months to December 2023).
Therefore, Basic-Fit has an ROCE of 3.2%. In absolute terms, that's a low return and it also under-performs the Hospitality industry average of 7.3%.
View our latest analysis for Basic-Fit
In the above chart we have measured Basic-Fit's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Basic-Fit .
What Does the ROCE Trend For Basic-Fit Tell Us?
In terms of Basic-Fit's historical ROCE trend, it doesn't exactly demand attention. The company has consistently earned 3.2% for the last five years, and the capital employed within the business has risen 102% in that time. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.
The Bottom Line
As we've seen above, Basic-Fit's returns on capital haven't increased but it is reinvesting in the business. Since the stock has declined 33% over the last five years, investors may not be too optimistic on this trend improving either. On the whole, we aren't too inspired by the underlying trends and we think there may be better chances of finding a multi-bagger elsewhere.
Basic-Fit does have some risks though, and we've spotted 1 warning sign for Basic-Fit that you might be interested in.
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.
