If you’re looking for a multi-bagger, there’s a few things to keep an eye out for. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it’s a business that is reinvesting profits at increasing rates of return. Ergo, when we looked at the ROCE trends at INFICON Holding (VTX:IFCN), we liked what we saw.
What Is Return On Capital Employed (ROCE)?
Just to clarify if you’re unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for INFICON Holding:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)
0.41 = US$137m ÷ (US$510m – US$173m) (Based on the trailing twelve months to June 2024).
So, INFICON Holding has an ROCE of 41%. In absolute terms that’s a great return and it’s even better than the Electronic industry average of 13%.
View our latest analysis for INFICON Holding
Above you can see how the current ROCE for INFICON Holding compares to its prior returns on capital, but there’s only so much you can tell from the past. If you’re interested, you can view the analysts predictions in our free analyst report for INFICON Holding .
So How Is INFICON Holding’s ROCE Trending?
INFICON Holding deserves to be commended in regards to it’s returns. The company has employed 73% more capital in the last five years, and the returns on that capital have remained stable at 41%. Now considering ROCE is an attractive 41%, this combination is actually pretty appealing because it means the business can consistently put money to work and generate these high returns. If these trends can continue, it wouldn’t surprise us if the company became a multi-bagger.
The Bottom Line On INFICON Holding’s ROCE
In short, we’d argue INFICON Holding has the makings of a multi-bagger since its been able to compound its capital at very profitable rates of return. And the stock has done incredibly well with a 111% return over the last five years, so long term investors are no doubt ecstatic with that result. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.
Before jumping to any conclusions though, we need to know what value we’re getting for the current share price. That’s where you can check out our FREE intrinsic value estimation for IFCN that compares the share price and estimated value.
INFICON Holding is not the only stock earning high returns. If you’d like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.
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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.
