Yahoo Finance Returns Are Gaining Momentum At Wacker Neuson (ETR:WAC)
Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Wacker Neuson (ETR:WAC) looks quite promising in regards to its trends of return on capital.
Return On Capital Employed (ROCE): What Is It?
Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Wacker Neuson is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.11 = €189m ÷ (€2.3b - €565m) (Based on the trailing twelve months to September 2022).
Thus, Wacker Neuson has an ROCE of 11%. That's a relatively normal return on capital, and it's around the 9.1% generated by the Machinery industry.
See our latest analysis for Wacker Neuson
In the above chart we have measured Wacker Neuson's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Wacker Neuson.
What Can We Tell From Wacker Neuson's ROCE Trend?
Wacker Neuson is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 11%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 30%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.
What We Can Learn From Wacker Neuson's ROCE
A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Wacker Neuson has. Astute investors may have an opportunity here because the stock has declined 37% in the last five years. So researching this company further and determining whether or not these trends will continue seems justified.
One more thing, we've spotted 1 warning sign facing Wacker Neuson that you might find interesting.
While Wacker Neuson 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.
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