Yahoo Finance Nabaltec's (ETR:NTG) Returns Have Hit A Wall
Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. Having said that, from a first glance at Nabaltec (ETR:NTG) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper 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. The formula for this calculation on Nabaltec is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.07 = €19m ÷ (€294m - €25m) (Based on the trailing twelve months to March 2024).
Therefore, Nabaltec has an ROCE of 7.0%. Even though it's in line with the industry average of 7.4%, it's still a low return by itself.
View our latest analysis for Nabaltec
In the above chart we have measured Nabaltec's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Nabaltec for free.
What Can We Tell From Nabaltec's ROCE Trend?
In terms of Nabaltec's historical ROCE trend, it doesn't exactly demand attention. Over the past five years, ROCE has remained relatively flat at around 7.0% and the business has deployed 29% more capital into its operations. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.
Our Take On Nabaltec's ROCE
In conclusion, Nabaltec has been investing more capital into the business, but returns on that capital haven't increased. And in the last five years, the stock has given away 51% so the market doesn't look too hopeful on these trends strengthening any time soon. Therefore based on the analysis done in this article, we don't think Nabaltec has the makings of a multi-bagger.
On a separate note, we've found 2 warning signs for Nabaltec you'll probably want to know about.
While Nabaltec 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.
