Yahoo Finance Returns At Pfeiffer Vacuum Technology (ETR:PFV) Appear To Be Weighed Down
If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. That's why when we briefly looked at Pfeiffer Vacuum Technology's (ETR:PFV) ROCE trend, we were pretty happy with what we saw.
Return On Capital Employed (ROCE): What Is It?
Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Pfeiffer Vacuum Technology:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.15 = €117m ÷ (€962m - €204m) (Based on the trailing twelve months to September 2023).
Therefore, Pfeiffer Vacuum Technology has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 11% generated by the Machinery industry.
View our latest analysis for Pfeiffer Vacuum Technology
Above you can see how the current ROCE for Pfeiffer Vacuum Technology compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Pfeiffer Vacuum Technology .
What The Trend Of ROCE Can Tell Us
While the returns on capital are good, they haven't moved much. Over the past five years, ROCE has remained relatively flat at around 15% and the business has deployed 61% more capital into its operations. Since 15% 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 Pfeiffer Vacuum Technology's ROCE
The main thing to remember is that Pfeiffer Vacuum Technology has proven its ability to continually reinvest at respectable rates of return. And given the stock has only risen 10% over the last five years, we'd suspect the market is beginning to recognize these trends. So to determine if Pfeiffer Vacuum Technology is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.
If you'd like to know about the risks facing Pfeiffer Vacuum Technology, we've discovered 1 warning sign that you should be aware of.
While Pfeiffer Vacuum Technology 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.
