Did you know that certain financial measures can provide clues about a potential multi-bagger? First, we will want to see a return on capital employed (ROCE) which increases and, on the other hand, a based capital employed. Basically, it means that a business has profitable initiatives that it can keep reinvesting in, which is a hallmark of a dialing machine. With that in mind, we have noticed some promising trends at Medicover (STO: MCOV B) so let’s look a little deeper.
What is Return on Employee Capital (ROCE)?
Just to clarify if you’re not sure, ROCE is a measure of the pre-tax income (as a percentage) that a business earns on the capital invested in its business. Analysts use this formula to calculate it for Medicover:
Return on capital employed = Profit before interest and taxes (EBIT) ÷ (Total assets – Current liabilities)
0.11 = € 103m ÷ (€ 1.2bn – € 238m) (Based on the last twelve months up to March 2021).
So, Medicover has a ROCE of 11%. This is a relatively normal return on capital, and it hovers around the 10% generated by the healthcare industry.
Check out our latest review for Medicover
Above you can see how Medicover’s current ROCE compares to its previous returns on capital, but there is little you can say about the past. If you are interested, you can view analyst forecasts in our free analyst forecast report for the company.
What is the trend for returns?
Medicover shows positive trends. Over the past five years, return on capital employed has increased substantially to 11%. The amount of capital employed also increased by 236%. Increasing returns on an increasing amount of capital are common among multi-baggers and that is why we are impressed.
Medicover’s ROCE result
A business that increases its returns on capital and can constantly reinvest in itself is a highly desirable trait, and that’s what Medicover has. Given that the stock has returned 221% to shareholders over the past three years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your while to check if these trends will continue.
While Medicover looks awesome, no business is worth an endless price. The intrinsic value infographic in our free The research report shows whether MCOV B is currently trading at a fair price.
If you want to look for solid businesses with great income, check out this free list of companies with good balance sheets and impressive returns on equity.
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