Yahoo Finance Spielvereinigung Unterhaching Fußball GmbH KGaA's (ETR:S6P) Returns On Capital Are Heading Higher
Did you know there are some financial metrics that can provide clues of a potential multi-bagger? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Spielvereinigung Unterhaching Fußball GmbH KGaA (ETR:S6P) looks quite promising in regards to its trends of return on capital.
What Is Return On Capital Employed (ROCE)?
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Spielvereinigung Unterhaching Fußball GmbH KGaA, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.11 = €1.1m ÷ (€12m - €2.5m) (Based on the trailing twelve months to June 2022).
So, Spielvereinigung Unterhaching Fußball GmbH KGaA has an ROCE of 11%. That's a pretty standard return and it's in line with the industry average of 11%.
Check out our latest analysis for Spielvereinigung Unterhaching Fußball 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, revenue and cash flow of Spielvereinigung Unterhaching Fußball GmbH KGaA, check out these free graphs here.
So How Is Spielvereinigung Unterhaching Fußball GmbH KGaA's ROCE Trending?
We're delighted to see that Spielvereinigung Unterhaching Fußball GmbH KGaA is reaping rewards from its investments and is now generating some pre-tax profits. Shareholders would no doubt be pleased with this because the business was loss-making three years ago but is is now generating 11% on its capital. And unsurprisingly, like most companies trying to break into the black, Spielvereinigung Unterhaching Fußball GmbH KGaA is utilizing 337% more capital than it was three years ago. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.
On a related note, the company's ratio of current liabilities to total assets has decreased to 21%, which basically reduces it's funding from the likes of short-term creditors or suppliers. Therefore we can rest assured that the growth in ROCE is a result of the business' fundamental improvements, rather than a cooking class featuring this company's books.
In Conclusion...
In summary, it's great to see that Spielvereinigung Unterhaching Fußball GmbH KGaA has managed to break into profitability and is continuing to reinvest in its business. Given the stock has declined 43% in the last three years, this could be a good investment if the valuation and other metrics are also appealing. That being the case, research into the company's current valuation metrics and future prospects seems fitting.
If you want to continue researching Spielvereinigung Unterhaching Fußball GmbH KGaA, you might be interested to know about the 4 warning signs that our analysis has discovered.
While Spielvereinigung Unterhaching Fußball GmbH KGaA may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.
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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.
