Returns At Borussia Dortmund GmbH Kommanditgesellschaft auf Aktien (ETR:BVB) Are On The Way Up

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. Speaking of which, we noticed some great changes in Borussia Dortmund GmbH Kommanditgesellschaft auf Aktien's (ETR:BVB) returns on capital, so let's have a look.

What Is 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. The formula for this calculation on Borussia Dortmund GmbH Kommanditgesellschaft auf Aktien is:

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

0.094 = €40m ÷ (€614m - €192m) (Based on the trailing twelve months to December 2023).

Thus, Borussia Dortmund GmbH Kommanditgesellschaft auf Aktien has an ROCE of 9.4%. In absolute terms, that's a low return and it also under-performs the Entertainment industry average of 17%.

See our latest analysis for Borussia Dortmund GmbH Kommanditgesellschaft auf Aktien

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Above you can see how the current ROCE for Borussia Dortmund GmbH Kommanditgesellschaft auf Aktien compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Borussia Dortmund GmbH Kommanditgesellschaft auf Aktien .

What Can We Tell From Borussia Dortmund GmbH Kommanditgesellschaft auf Aktien's ROCE Trend?

Borussia Dortmund GmbH Kommanditgesellschaft auf Aktien's ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 29% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

The Bottom Line On Borussia Dortmund GmbH Kommanditgesellschaft auf Aktien's ROCE

To sum it up, Borussia Dortmund GmbH Kommanditgesellschaft auf Aktien is collecting higher returns from the same amount of capital, and that's impressive. And since the stock has fallen 55% over the last five years, there might be an opportunity here. So researching this company further and determining whether or not these trends will continue seems justified.

One more thing to note, we've identified 2 warning signs with Borussia Dortmund GmbH Kommanditgesellschaft auf Aktien and understanding these should be part of your investment process.

While Borussia Dortmund GmbH Kommanditgesellschaft auf Aktien may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list 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.