When we want to find a potential multi-bagger, there are often underlying trends that can provide clues. Usually we want to identify a trend of growth return on the capital employed (ROCE) and in parallel a growing base of the capital employed. Basically, this means that a company has profitable initiatives in which it can continue to reinvest, which is a characteristic of a compounding machine. In this sense, the ROCE of Artifex Mundi (WSE:ART) looks great, so let’s see what the trend tells us.
Return on Capital Employed (ROCE): What is it?
If you’ve never worked with ROCE before, it measures the “return” (profit before tax) that a company generates on the capital employed in its business. The formula for this calculation at Artifex Mundi is:
Return on capital = earnings before interest and taxes (EBIT) ÷ (total assets – current liabilities)
0.31 = 28 million zł ÷ (107 million zł – 17 million zł) (Based on the last twelve months to March 2024).
Therefore, Artifex Mundi has a ROCE of 31%. That’s a fantastic return, and not only that, it also beats the 18% average earned by companies in a similar industry.
Check out our latest analysis for Artifex Mundi
Historical performance is a good place to start when analyzing a stock. Above you can see Artifex Mundi’s ROCE compared to past returns. If you want to examine Artifex Mundi’s past in more detail, read this free Graph of Artifex Mundi’s past earnings, revenue and cash flow.
What the ROCE trend can tell us
We are excited about the trends we are seeing at Artifex Mundi. The data shows that return on capital has increased significantly to 31% over the last five years. The company is effectively making more money per dollar of capital deployed, and it is worth noting that the amount of capital has also increased by 129%. So we are very excited about what we are seeing at Artifex Mundi thanks to its ability to profitably reinvest capital.
The most important things to take away
In summary, it’s great to see that Artifex Mundi can increase its returns by consistently reinvesting its capital at increasing yields, as these are some of the key ingredients of these sought-after multibaggers. With the stock having returned an astonishing 575% to shareholders over the past five years, investors seem to be recognizing these changes. Nevertheless, we believe the company deserves a closer look due to its promising fundamentals.
Artifex Mundi carries some risks, as we have found 3 warning signs (and 1 that is concerning) that we think you should know about.
If you want to see other companies that deliver high returns, check out our free A list of high-yielding companies with solid balance sheets can be found here.
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This Simply Wall St article is of a general nature. We comment solely on the basis of historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.
