Yahoo Finance We Like LIMES Schlosskliniken's (ETR:LIK) Returns And Here's How They're Trending
Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. And in light of that, the trends we're seeing at LIMES Schlosskliniken's (ETR:LIK) look very promising so lets take a look.
Understanding Return On Capital Employed (ROCE)
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for LIMES Schlosskliniken:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.21 = €4.8m ÷ (€27m - €3.9m) (Based on the trailing twelve months to June 2023).
Therefore, LIMES Schlosskliniken has an ROCE of 21%. In absolute terms that's a great return and it's even better than the Healthcare industry average of 5.9%.
View our latest analysis for LIMES Schlosskliniken
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 LIMES Schlosskliniken's past further, check out this free graph covering LIMES Schlosskliniken's past earnings, revenue and cash flow.
What Can We Tell From LIMES Schlosskliniken's ROCE Trend?
We're delighted to see that LIMES Schlosskliniken is reaping rewards from its investments and is now generating some pre-tax profits. The company was generating losses five years ago, but now it's earning 21% which is a sight for sore eyes. In addition to that, LIMES Schlosskliniken is employing 182% more capital than previously which is expected of a company that's trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.
The Bottom Line On LIMES Schlosskliniken's ROCE
Long story short, we're delighted to see that LIMES Schlosskliniken's reinvestment activities have paid off and the company is now profitable. And a remarkable 179% total return over the last three years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if LIMES Schlosskliniken can keep these trends up, it could have a bright future ahead.
On a final note, we found 2 warning signs for LIMES Schlosskliniken (1 is concerning) you should be aware of.
If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.
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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.
