Returns At Bowler Metcalf (JSE:BCF) Are On The Way Up
Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, we've noticed some promising trends at Bowler Metcalf (JSE:BCF) so let's look a bit deeper.
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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. To calculate this metric for Bowler Metcalf, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.15 = R133m ÷ (R954m - R78m) (Based on the trailing twelve months to December 2024).
So, Bowler Metcalf has an ROCE of 15%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Chemicals industry average of 18%.
View our latest analysis for Bowler Metcalf
Historical performance is a great place to start when researching a stock so above you can see the gauge for Bowler Metcalf's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Bowler Metcalf.
The trends we've noticed at Bowler Metcalf are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 15%. The amount of capital employed has increased too, by 27%. So we're very much inspired by what we're seeing at Bowler Metcalf thanks to its ability to profitably reinvest capital.
To sum it up, Bowler Metcalf has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if Bowler Metcalf can keep these trends up, it could have a bright future ahead.
Bowler Metcalf does have some risks, we noticed 3 warning signs (and 1 which shouldn't be ignored) we think you should know about.
While Bowler Metcalf may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.
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