Slowing Rates Of Return At Lavena AD (BUL:LAV) Leave Little Room For Excitement

What trends should we look for it we want to identify stocks that can multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Although, when we looked at Lavena AD (BUL:LAV), it didn't seem to tick all of these boxes.

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Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Lavena AD is:

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

0.074 = лв2.3m ÷ (лв34m - лв3.4m) (Based on the trailing twelve months to September 2025).

Thus, Lavena AD has an ROCE of 7.4%. In absolute terms, that's a low return and it also under-performs the Personal Products industry average of 13%.

See our latest analysis for Lavena AD

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating Lavena AD's past further, check out this free graph covering Lavena AD's past earnings, revenue and cash flow.

So How Is Lavena AD's ROCE Trending?

Things have been pretty stable at Lavena AD, with its capital employed and returns on that capital staying somewhat the same for the last five years. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. So unless we see a substantial change at Lavena AD in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

What We Can Learn From Lavena AD's ROCE

We can conclude that in regards to Lavena AD's returns on capital employed and the trends, there isn't much change to report on. And in the last five years, the stock has given away 67% so the market doesn't look too hopeful on these trends strengthening any time soon. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.

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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.