Gesundheitswelt Chiemgau (MUN:JTH) Is Looking To Continue Growing Its Returns On Capital

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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, we've noticed some promising trends at Gesundheitswelt Chiemgau (MUN:JTH) so let's look a bit deeper.

Return On Capital Employed (ROCE): What Is It?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on Gesundheitswelt Chiemgau is:

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

0.066 = €4.4m ÷ (€77m - €10m) (Based on the trailing twelve months to December 2022).

So, Gesundheitswelt Chiemgau has an ROCE of 6.6%. On its own that's a low return, but compared to the average of 5.2% generated by the Healthcare industry, it's much better.

View our latest analysis for Gesundheitswelt Chiemgau

roce

Historical performance is a great place to start when researching a stock so above you can see the gauge for Gesundheitswelt Chiemgau's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Gesundheitswelt Chiemgau, check out these free graphs here.

So How Is Gesundheitswelt Chiemgau's ROCE Trending?

Gesundheitswelt Chiemgau is showing promise given that its ROCE is trending up and to the right. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 44% in that same time. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

The Key Takeaway

As discussed above, Gesundheitswelt Chiemgau appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. Since the stock has only returned 6.2% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

Gesundheitswelt Chiemgau does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those can't be ignored...

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.