Yahoo Finance Returns On Capital Are Showing Encouraging Signs At LUDWIG BECK am Rathauseck - Textilhaus Feldmeier (ETR:ECK)
If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, we've noticed some promising trends at LUDWIG BECK am Rathauseck - Textilhaus Feldmeier (ETR:ECK) so let's look a bit deeper.
Return On Capital Employed (ROCE): What Is It?
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on LUDWIG BECK am Rathauseck - Textilhaus Feldmeier is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.021 = €3.0m ÷ (€170m - €27m) (Based on the trailing twelve months to March 2024).
Thus, LUDWIG BECK am Rathauseck - Textilhaus Feldmeier has an ROCE of 2.1%. Ultimately, that's a low return and it under-performs the Multiline Retail industry average of 8.7%.
Check out our latest analysis for LUDWIG BECK am Rathauseck - Textilhaus Feldmeier
Historical performance is a great place to start when researching a stock so above you can see the gauge for LUDWIG BECK am Rathauseck - Textilhaus Feldmeier's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of LUDWIG BECK am Rathauseck - Textilhaus Feldmeier.
What Can We Tell From LUDWIG BECK am Rathauseck - Textilhaus Feldmeier's ROCE Trend?
Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. We found that the returns on capital employed over the last five years have risen by 304%. That's not bad because this tells for every dollar invested (capital employed), the company is increasing the amount earned from that dollar. Interestingly, the business may be becoming more efficient because it's applying 46% less capital than it was five years ago. If this trend continues, the business might be getting more efficient but it's shrinking in terms of total assets.
Our Take On LUDWIG BECK am Rathauseck - Textilhaus Feldmeier's ROCE
In summary, it's great to see that LUDWIG BECK am Rathauseck - Textilhaus Feldmeier has been able to turn things around and earn higher returns on lower amounts of capital. And since the stock has fallen 21% over the last five years, there might be an opportunity here. That being the case, research into the company's current valuation metrics and future prospects seems fitting.
LUDWIG BECK am Rathauseck - Textilhaus Feldmeier does have some risks, we noticed 3 warning signs (and 1 which shouldn't be ignored) we think you should know about.
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.
