The Returns At Flughafen Wien (VIE:FLU) Provide Us With Signs Of What's To Come

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. In light of that, when we looked at Flughafen Wien (VIE:FLU) and its ROCE trend, we weren't exactly thrilled.

What is Return On Capital Employed (ROCE)?

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. Analysts use this formula to calculate it for Flughafen Wien:

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

0.063 = €120m ÷ (€2.3b - €356m) (Based on the trailing twelve months to June 2020).

Thus, Flughafen Wien has an ROCE of 6.3%. In absolute terms, that's a low return but it's around the Infrastructure industry average of 7.3%.

Check out our latest analysis for Flughafen Wien

In the above chart we have measured Flughafen Wien's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

So How Is Flughafen Wien's ROCE Trending?

In terms of Flughafen Wien's historical ROCE movements, the trend isn't fantastic. Around five years ago the returns on capital were 7.9%, but since then they've fallen to 6.3%. 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.

Our Take On Flughafen Wien's ROCE

We're a bit apprehensive about Flughafen Wien because despite more capital being deployed in the business, returns on that capital and sales have both fallen. Investors must expect better things on the horizon though because the stock has risen 37% in the last five years. Either way, we aren't huge fans of the current trends and so with that we think you might find better investments elsewhere.

Like most companies, Flughafen Wien does come with some risks, and we've found 1 warning sign that you should be aware of.

While Flughafen Wien 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. 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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