To find multibagger stocks, what are the fundamental trends in companies? In particular, we want to look at two things.First, grow return The first is capital employed (ROCE) and the second is the company's capital growth. amount of capital employed. If you see this, it usually means the company has a good business model and plenty of opportunities for profitable reinvestment. With that in mind, the trends we see are: Objective (ASX:OCL) looks very promising, so let's take a look.
Return on Capital Employed (ROCE): What is it?
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. To calculate this metric for your goal, use the following formula:
Return on Capital Employed = Earnings before interest and tax (EBIT) ÷ (Total assets – Current liabilities)
0.35 = AU$32 million ÷ (AU$146 million – AU$56 million) (Based on the previous 12 months to December 2023).
therefore, Target ROCE is 35%. That's an impressive return, and not only that, but it's also higher than the average 13% earned by companies in similar industries.
Check out our latest analysis for Objective.
In the chart above, we measured Objective's previous ROCE against its previous performance, but the future is probably more important. To see what analysts are predicting for the future, check out Objective's free analyst report.
So, how is Objective's ROCE trending?
The goals show some positive trends. Data shows that return on equity has increased significantly to 35% over the past five years. It is worth noting that the company has virtually increased its return per dollar of capital employed, and the amount of capital has also increased by 157%. Increasing returns due to increased capital is common for multibaggers, which is why we're impressed.
Important points
Overall, it's great to see Objective benefiting from previous investments and expanding its capital base. The impressive total return of 386% over the past five years shows that investors expect even better things to happen in the future. That said, we still think promising fundamentals mean the company requires further due diligence.
Objective looks impressive, but no company is worth the infinite price. OCL's intrinsic value infographic helps you visualize whether it's currently trading at a fair price.
If you want to see other companies earning high profits, check out our article. free Here is a list of companies with strong balance sheets and high profits.
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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, 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.
