The Return Trends At B.O.S. Better Online Solutions (NASDAQ:BOSC) Look Promising
What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So on that note, B.O.S. Better Online Solutions (NASDAQ:BOSC) looks quite promising in regards to its trends of return on capital.
Understanding Return On Capital Employed (ROCE)
For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on B.O.S. Better Online Solutions is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.12 = US$2.4m ÷ (US$32m - US$11m) (Based on the trailing twelve months to March 2023).
Therefore, B.O.S. Better Online Solutions has an ROCE of 12%. That's a relatively normal return on capital, and it's around the 9.9% generated by the Communications industry.
Check out our latest analysis for B.O.S. Better Online Solutions
Historical performance is a great place to start when researching a stock so above you can see the gauge for B.O.S. Better Online Solutions' ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of B.O.S. Better Online Solutions, check out these free graphs here.
How Are Returns Trending?
We like the trends that we're seeing from B.O.S. Better Online Solutions. Over the last five years, returns on capital employed have risen substantially to 12%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 55%. So we're very much inspired by what we're seeing at B.O.S. Better Online Solutions thanks to its ability to profitably reinvest capital.
The Bottom Line
All in all, it's terrific to see that B.O.S. Better Online Solutions is reaping the rewards from prior investments and is growing its capital base. Since the stock has only returned 22% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.
On a separate note, we've found 1 warning sign for B.O.S. Better Online Solutions you'll probably want to know about.
While B.O.S. Better Online Solutions isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
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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.
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