Returns On Capital At SW Umwelttechnik Stoiser & Wolschner (VIE:SWUT) Paint A Concerning Picture

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. However, after briefly looking over the numbers, we don't think SW Umwelttechnik Stoiser & Wolschner (VIE:SWUT) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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Understanding 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. To calculate this metric for SW Umwelttechnik Stoiser & Wolschner, this is the formula:

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

0.071 = €6.2m ÷ (€139m - €53m) (Based on the trailing twelve months to December 2024).

Therefore, SW Umwelttechnik Stoiser & Wolschner has an ROCE of 7.1%. In absolute terms, that's a low return and it also under-performs the Construction industry average of 11%.

See our latest analysis for SW Umwelttechnik Stoiser & Wolschner

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

What Can We Tell From SW Umwelttechnik Stoiser & Wolschner's ROCE Trend?

In terms of SW Umwelttechnik Stoiser & Wolschner's historical ROCE movements, the trend isn't fantastic. To be more specific, ROCE has fallen from 19% over the last five years. Given the business is employing more capital while revenue has slipped, this is a bit concerning. This could mean that the business is losing its competitive advantage or market share, because while more money is being put into ventures, it's actually producing a lower return - "less bang for their buck" per se.

The Bottom Line

We're a bit apprehensive about SW Umwelttechnik Stoiser & Wolschner because despite more capital being deployed in the business, returns on that capital and sales have both fallen. However the stock has delivered a 69% return to shareholders over the last five years, so investors might be expecting the trends to turn around. In any case, the current underlying trends don't bode well for long term performance so unless they reverse, we'd start looking elsewhere.

On a final note, we found 6 warning signs for SW Umwelttechnik Stoiser & Wolschner (2 shouldn't be ignored) you should be aware of.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.