Hamburger Hafen und Logistik (ETR:HHFA) Hasn't Managed To Accelerate Its Returns

If you're looking for a multi-bagger, there's a few things to keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. That's why when we briefly looked at Hamburger Hafen und Logistik's (ETR:HHFA) ROCE trend, we were pretty happy with what we saw.

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 Hamburger Hafen und Logistik is:

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

0.10 = €248m ÷ (€2.8b - €396m) (Based on the trailing twelve months to June 2022).

So, Hamburger Hafen und Logistik has an ROCE of 10%. On its own, that's a standard return, however it's much better than the 8.3% generated by the Infrastructure industry.

See our latest analysis for Hamburger Hafen und Logistik

roce

In the above chart we have measured Hamburger Hafen und Logistik's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Hamburger Hafen und Logistik.

What Can We Tell From Hamburger Hafen und Logistik's ROCE Trend?

While the returns on capital are good, they haven't moved much. Over the past five years, ROCE has remained relatively flat at around 10% and the business has deployed 51% more capital into its operations. Since 10% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

What We Can Learn From Hamburger Hafen und Logistik's ROCE

The main thing to remember is that Hamburger Hafen und Logistik has proven its ability to continually reinvest at respectable rates of return. Yet over the last five years the stock has declined 41%, so the decline might provide an opening. That's why we think it'd be worthwhile to look further into this stock given the fundamentals are appealing.

If you'd like to know more about Hamburger Hafen und Logistik, we've spotted 3 warning signs, and 1 of them is a bit unpleasant.

While Hamburger Hafen und Logistik isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.

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