Yahoo Finance Deutsche Post (ETR:DHL) Is Looking To Continue Growing Its Returns On Capital
If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in Deutsche Post's (ETR:DHL) returns on capital, so let's have a look.
What Is Return On Capital Employed (ROCE)?
For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Deutsche Post:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.11 = €5.4b ÷ (€69b - €20b) (Based on the trailing twelve months to March 2024).
So, Deutsche Post has an ROCE of 11%. By itself that's a normal return on capital and it's in line with the industry's average returns of 11%.
View our latest analysis for Deutsche Post
Above you can see how the current ROCE for Deutsche Post 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 Deutsche Post .
What Can We Tell From Deutsche Post's ROCE Trend?
The trends we've noticed at Deutsche Post are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 11%. The amount of capital employed has increased too, by 38%. So we're very much inspired by what we're seeing at Deutsche Post thanks to its ability to profitably reinvest capital.
The Bottom Line
In summary, it's great to see that Deutsche Post can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And with a respectable 75% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. In light of that, we think it's worth looking further into this stock because if Deutsche Post can keep these trends up, it could have a bright future ahead.
On a final note, we've found 1 warning sign for Deutsche Post that we think you should be aware of.
For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.
