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BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- (FRA:BLH) Is Looking To Continue Growing Its Returns On Capital

editorial-team@simplywallst.com (Simply Wall St)
·3-min read

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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. Speaking of which, we noticed some great changes in BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-'s (FRA:BLH) returns on capital, so let's have a look.

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. To calculate this metric for BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-, this is the formula:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.025 = €25m ÷ (€1.3b - €312m) (Based on the trailing twelve months to December 2023).

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Thus, BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- has an ROCE of 2.5%. Ultimately, that's a low return and it under-performs the Infrastructure industry average of 9.0%.

View our latest analysis for BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-

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Historical performance is a great place to start when researching a stock so above you can see the gauge for BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-'s ROCE against it's prior returns. If you're interested in investigating BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-'s past further, check out this free graph covering BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-'s past earnings, revenue and cash flow.

So How Is BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-'s ROCE Trending?

The fact that BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- is now generating some pre-tax profits from its prior investments is very encouraging. The company was generating losses five years ago, but now it's earning 2.5% which is a sight for sore eyes. In addition to that, BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- is employing 138% more capital than previously which is expected of a company that's trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

One more thing to note, BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- has decreased current liabilities to 24% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance.

The Key Takeaway

Overall, BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. Astute investors may have an opportunity here because the stock has declined 22% in the last five years. With that in mind, we believe the promising trends warrant this stock for further investigation.

If you'd like to know more about BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-, we've spotted 4 warning signs, and 1 of them is potentially serious.

While BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.