Yahoo Finance Some Investors May Be Worried About Mineralbrunnen Überkingen-Teinach GmbH KGaA's (FRA:MUT) Returns On Capital
If you're looking at a mature business that's past the growth phase, what are some of the underlying trends that pop up? When we see a declining return on capital employed (ROCE) in conjunction with a declining base of capital employed, that's often how a mature business shows signs of aging. This combination can tell you that not only is the company investing less, it's earning less on what it does invest. So after we looked into Mineralbrunnen Überkingen-Teinach GmbH KGaA (FRA:MUT), the trends above didn't look too great.
Return On Capital Employed (ROCE): What Is It?
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 Mineralbrunnen Überkingen-Teinach GmbH KGaA:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.056 = €6.9m ÷ (€144m - €21m) (Based on the trailing twelve months to June 2023).
So, Mineralbrunnen Überkingen-Teinach GmbH KGaA has an ROCE of 5.6%. On its own that's a low return on capital but it's in line with the industry's average returns of 6.4%.
View our latest analysis for Mineralbrunnen Überkingen-Teinach GmbH KGaA
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 want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Mineralbrunnen Überkingen-Teinach GmbH KGaA.
What Can We Tell From Mineralbrunnen Überkingen-Teinach GmbH KGaA's ROCE Trend?
There is reason to be cautious about Mineralbrunnen Überkingen-Teinach GmbH KGaA, given the returns are trending downwards. About five years ago, returns on capital were 9.0%, however they're now substantially lower than that as we saw above. Meanwhile, capital employed in the business has stayed roughly the flat over the period. Companies that exhibit these attributes tend to not be shrinking, but they can be mature and facing pressure on their margins from competition. So because these trends aren't typically conducive to creating a multi-bagger, we wouldn't hold our breath on Mineralbrunnen Überkingen-Teinach GmbH KGaA becoming one if things continue as they have.
Our Take On Mineralbrunnen Überkingen-Teinach GmbH KGaA's ROCE
In summary, it's unfortunate that Mineralbrunnen Überkingen-Teinach GmbH KGaA is generating lower returns from the same amount of capital. And long term shareholders have watched their investments stay flat over the last five years. Unless there is a shift to a more positive trajectory in these metrics, we would look elsewhere.
On a final note, we found 4 warning signs for Mineralbrunnen Überkingen-Teinach GmbH KGaA (1 doesn't sit too well with us) you should be aware of.
While Mineralbrunnen Überkingen-Teinach GmbH KGaA 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.
