Investors Will Want BHB Brauholding Bayern-Mitte's (FRA:B9B) Growth In ROCE To Persist

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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. With that in mind, we've noticed some promising trends at BHB Brauholding Bayern-Mitte (FRA:B9B) so let's look a bit deeper.

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. Analysts use this formula to calculate it for BHB Brauholding Bayern-Mitte:

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

0.036 = €474k ÷ (€15m - €1.9m) (Based on the trailing twelve months to June 2023).

Therefore, BHB Brauholding Bayern-Mitte has an ROCE of 3.6%. In absolute terms, that's a low return and it also under-performs the Beverage industry average of 5.9%.

See our latest analysis for BHB Brauholding Bayern-Mitte

roce

In the above chart we have measured BHB Brauholding Bayern-Mitte'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 BHB Brauholding Bayern-Mitte for free.

What Can We Tell From BHB Brauholding Bayern-Mitte's ROCE Trend?

While the ROCE isn't as high as some other companies out there, it's great to see it's on the up. The figures show that over the last five years, ROCE has grown 28% whilst employing roughly the same amount of capital. 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. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

The Bottom Line On BHB Brauholding Bayern-Mitte's ROCE

In summary, we're delighted to see that BHB Brauholding Bayern-Mitte has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Since the total return from the stock has been almost flat over the last five years, there might be an opportunity here if the valuation looks good. So researching this company further and determining whether or not these trends will continue seems justified.

If you want to know some of the risks facing BHB Brauholding Bayern-Mitte we've found 4 warning signs (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

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.