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Wednesday, December 07, 2022

INFICON Holding (VTX:IFCN) knows how to allocate capital effectively

What early trends should we look for to identify stocks that could multiply in value over the long term? Typically, we would like to notice a tendency to increase Return On Capital Employed (ROCE) and along with it, an extension base of capital employed. Ultimately, it shows that this is a business that is reinvesting profits at increasing rates of return. With this in mind, the ROCE of Inficon Holding (VTX:IFCN) Looks great, so let’s see what the trend can tell us.

Return on Capital Employed (ROCE): What is it?

If you have not worked with ROCE before, it measures the ‘returns’ (profit before tax) generated by the company from the capital employed in its business. Analysts use this formula to calculate it for INFICON holding:

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

0.38 = US$100m (US$365m – US$101m) (Based on last twelve months to December 2021),

thus, INFICON Holding has a ROCE of 38%. This is a great return and not only that, it is higher than the average 16% earned by companies in the same industry.

View our latest analysis for INFICON Holding

Year
SWX: IFCN Return on Capital Employed as on 15 April 2022

In the chart above we have measured the past ROCE of INFICON Holding by its past performance, but the future is arguably more important. If you’re interested, you can check out our analysts’ forecasts in free Report on analyst forecasts for the company.

What ROCE trends can tell us

Inficon Holding is showing some positive trends. In the last five years, the return on capital employed has increased substantially to 38%. The company is effectively making more money per dollar of capital used, and it’s worth noting that the amount of capital also increased by 52%. So we’re very motivated by what we’re seeing in INFICON Holding, thanks to its ability to reinvest capital profitably.

What can we learn from INFICON HOLDING’s ROCE?

In short, it is great to see that INFICON Holding can achieve returns by continuously reinvesting capital at increasing rates of return, as these are some of the key elements of the highly sought after multi-bagger. And as the stock has performed exceptionally well over the past five years, these patterns are being accounted for by investors. In light of this, we think it is worth looking forward into this stock because if Inficon Holding can sustain these trends, its future could be bright.

On a different note, we have found 1 WARNING SIGN FOR INFICON HOLDING You might want to know about it.

Inficon Holding is not the only stock that is earning high returns. If you want to see more, visit our free List of companies earning high return on equity with solid fundamentals.

This article by Simple Wall St. is general in nature. We only provide commentary based on historical data and analyst forecasts using an unbiased methodology and our articles are not intended to be financial advice. It does not recommend buying or selling any stock, and does not take into account your objectives, or your financial situation. Our goal is to bring you long term focused analysis powered by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative content. Simple Wall St does not have a position in any of the stocks mentioned.

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