Kistos Holdings (LON:KIST) Is Aiming To Keep Up Its Impressive Returns
Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. That's why when we briefly looked at Kistos Holdings' (LON:KIST) ROCE trend, we were very happy with what we saw.
Understanding Return On Capital Employed (ROCE)
For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Kistos Holdings:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.21 = €154m ÷ (€925m - €193m) (Based on the trailing twelve months to June 2023).
Thus, Kistos Holdings has an ROCE of 21%. In absolute terms that's a great return and it's even better than the Oil and Gas industry average of 11%.
See our latest analysis for Kistos Holdings
In the above chart we have measured Kistos Holdings' 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 report on analyst forecasts for the company.
What The Trend Of ROCE Can Tell Us
Kistos Holdings deserves to be commended in regards to it's returns. The company has consistently earned 21% for the last one year, and the capital employed within the business has risen 130% in that time. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. If Kistos Holdings can keep this up, we'd be very optimistic about its future.
What We Can Learn From Kistos Holdings' ROCE
Kistos Holdings has demonstrated its proficiency by generating high returns on increasing amounts of capital employed, which we're thrilled about. Yet over the last year the stock has declined 56%, so the decline might provide an opening. For that reason, savvy investors might want to look further into this company in case it's a prime investment.
On a separate note, we've found 1 warning sign for Kistos Holdings you'll probably want to know about.
Kistos Holdings 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.
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.
