Sipex's (BVB:SPX) Returns Have Hit A Wall
If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, 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. However, after investigating Sipex (BVB:SPX), we don't think it's current trends fit the mold of a multi-bagger.
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. To calculate this metric for Sipex, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.17 = RON15m ÷ (RON151m - RON64m) (Based on the trailing twelve months to September 2025).
Thus, Sipex has an ROCE of 17%. On its own, that's a standard return, however it's much better than the 11% generated by the Trade Distributors industry.
Check out our latest analysis for Sipex
Historical performance is a great place to start when researching a stock so above you can see the gauge for Sipex's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Sipex.
The Trend Of ROCE
There hasn't been much to report for Sipex's returns and its level of capital employed because both metrics have been steady for the past two years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect Sipex to be a multi-bagger going forward.
On a side note, Sipex's current liabilities are still rather high at 42% of total assets. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.
The Bottom Line
In a nutshell, Sipex has been trudging along with the same returns from the same amount of capital over the last two years. And investors may be recognizing these trends since the stock has only returned a total of 3.6% to shareholders over the last year. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.
On a final note, we found 2 warning signs for Sipex (1 is concerning) you should be aware of.
If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.
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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.