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Why Bucher Industries’ (VTX:BUCN) 22% return on capital should have your attention

What trends should we pay attention to if we want to identify stocks that can multiply in value over the long term? We want to see two things, among other things; primarily a growing one yield on invested capital (ROCE) and secondly on an expansion of the company quantity of the invested capital. Ultimately, this shows that it is a company that reinvests profits at increasingly higher returns. Speaking of which, we’ve noticed some big changes Bucher Industries’ (VTX:BUCN) return on capital, so let’s take a look.

What is return on capital employed (ROCE)?

For those unsure of what ROCE is, it measures the amount of pre-tax profit a company can generate from the capital employed in its business. To calculate this statistic for Bucher Industries, this is the formula:

Return on Capital Employed = Earnings Before Interest and Taxes (EBIT) ÷ (Total Assets – Current Liabilities)

0.22 = CHF414m ÷ (CHF3.0b – CHF1.0b) (Based on the last twelve months up to and including December 2023).

Therefore, Bucher Industries has a ROCE of 22%. That’s a fantastic return, and not only that: it beats the average of 15% that companies in a similar sector earn.

Check out our latest analysis for Bucher Industries

SWX:BUCN Return on Capital Employed April 25, 2024

In the chart above, we compared Bucher Industries’ past ROCE to its past performance, but the future is arguably more important. If you want to see what analysts are predicting for the future, check out our free analyst report for Bucher Industries.

What can we infer from Bucher Industries’ ROCE trend?

Bucher Industries’ ROCE growth is quite impressive. The figures show that ROCE has grown by 21% over the past five years, while deploying approximately the same amount of capital. So it is likely that the company is now reaping the full benefits of its previous investments, as the capital invested has not changed significantly. Things are looking good on that front, so it’s worth checking out what management has said about its future growth plans.

Our view on Bucher Industries’ ROCE

In short: Bucher Industries gets higher returns from the same amount of capital, and that’s impressive. Considering the stock has returned 20% to its shareholders over the past five years, it might be reasonable to think that investors are not yet fully aware of the promising trends. Therefore, we would investigate this stock further, in case it has more characteristics that could allow it to multiply in the long term.

If you want to know some of the risks Bucher Industries faces, we’ve found them 2 warning signs (1 is a bit concerning!) What to consider before investing here.

If you want to look for more stocks that have delivered high returns, check this out free list of stocks with solid balance sheets that also deliver high returns on equity.

Valuation is complex, but we help make it simple.

Find out if Bucher Industries may be over or undervalued by checking out our comprehensive analysis, including: fair value estimates, risks and cautions, dividends, insider transactions and financial health.

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This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. We aim to provide you with targeted, long-term analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Simply Wall St has no positions in the stocks mentioned.