Under The Bonnet, iEnergizer's (LON:IBPO) Returns Look Impressive
If you're looking for a multi-bagger, there's a few things to keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. With that in mind, the ROCE of iEnergizer (LON:IBPO) looks great, so lets see what the trend can tell us.
Understanding Return On Capital Employed (ROCE)
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for iEnergizer:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.44 = US$96m ÷ (US$274m - US$55m) (Based on the trailing twelve months to September 2022).
Therefore, iEnergizer has an ROCE of 44%. In absolute terms that's a great return and it's even better than the IT industry average of 9.6%.
Check out our latest analysis for iEnergizer
In the above chart we have measured iEnergizer's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for iEnergizer.
So How Is iEnergizer's ROCE Trending?
Investors would be pleased with what's happening at iEnergizer. Over the last five years, returns on capital employed have risen substantially to 44%. Basically the business is earning more per dollar of capital invested and in addition to that, 35% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.
The Key Takeaway
All in all, it's terrific to see that iEnergizer is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 685% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if iEnergizer can keep these trends up, it could have a bright future ahead.
iEnergizer does have some risks, we noticed 3 warning signs (and 1 which is a bit concerning) we think you should know about.
High returns are a key ingredient to strong performance, so check out our free list ofstocks 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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