Yahoo Finance Returns At Ströer SE KGaA (ETR:SAX) Are On The Way Up
To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, we've noticed some promising trends at Ströer SE KGaA (ETR:SAX) so let's look a bit deeper.
What Is Return On Capital Employed (ROCE)?
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. To calculate this metric for Ströer SE KGaA, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.11 = €232m ÷ (€2.8b - €657m) (Based on the trailing twelve months to September 2023).
So, Ströer SE KGaA has an ROCE of 11%. In absolute terms, that's a satisfactory return, but compared to the Media industry average of 8.1% it's much better.
See our latest analysis for Ströer SE KGaA
Above you can see how the current ROCE for Ströer SE KGaA compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Ströer SE KGaA .
What Can We Tell From Ströer SE KGaA's ROCE Trend?
Ströer SE KGaA 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 86% in that same time. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. 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 Ströer SE KGaA's ROCE
In summary, we're delighted to see that Ströer SE KGaA has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 25% to shareholders. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.
One more thing, we've spotted 3 warning signs facing Ströer SE KGaA that you might find interesting.
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.
