Yahoo Finance Returns On Capital At LUDWIG BECK am Rathauseck - Textilhaus Feldmeier (ETR:ECK) Paint A Concerning Picture
If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Although, when we looked at LUDWIG BECK am Rathauseck - Textilhaus Feldmeier (ETR:ECK), it didn't seem to tick all of these boxes.
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. Analysts use this formula to calculate it for LUDWIG BECK am Rathauseck - Textilhaus Feldmeier:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.025 = €3.3m ÷ (€170m - €38m) (Based on the trailing twelve months to September 2023).
Thus, LUDWIG BECK am Rathauseck - Textilhaus Feldmeier has an ROCE of 2.5%. In absolute terms, that's a low return and it also under-performs the Multiline Retail industry average of 7.7%.
See our latest analysis for LUDWIG BECK am Rathauseck - Textilhaus Feldmeier
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'd like to look at how LUDWIG BECK am Rathauseck - Textilhaus Feldmeier has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.
So How Is LUDWIG BECK am Rathauseck - Textilhaus Feldmeier's ROCE Trending?
On the surface, the trend of ROCE at LUDWIG BECK am Rathauseck - Textilhaus Feldmeier doesn't inspire confidence. Over the last five years, returns on capital have decreased to 2.5% from 3.7% five years ago. On the other hand, the company has been employing more capital without a corresponding improvement in sales in the last year, which could suggest these investments are longer term plays. It may take some time before the company starts to see any change in earnings from these investments.
The Key Takeaway
To conclude, we've found that LUDWIG BECK am Rathauseck - Textilhaus Feldmeier is reinvesting in the business, but returns have been falling. And investors appear hesitant that the trends will pick up because the stock has fallen 26% in the last five years. 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.
On a final note, we found 3 warning signs for LUDWIG BECK am Rathauseck - Textilhaus Feldmeier (1 makes us a bit uncomfortable) 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.
