Is Dätwyler Holding (VTX:DAE) A Future Multi-bagger?

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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 Dätwyler Holding (VTX:DAE) so let's look a bit deeper.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Dätwyler Holding:

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

0.16 = CHF148m ÷ (CHF1.1b - CHF200m) (Based on the trailing twelve months to December 2020).

Thus, Dätwyler Holding has an ROCE of 16%. On its own, that's a standard return, however it's much better than the 9.6% generated by the Machinery industry.

Check out our latest analysis for Dätwyler Holding

Above you can see how the current ROCE for Dätwyler Holding compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Dätwyler Holding here for free.

So How Is Dätwyler Holding's ROCE Trending?

Dätwyler Holding has not disappointed with their ROCE growth. The figures show that over the last five years, ROCE has grown 21% whilst employing roughly the same amount of capital. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

The Bottom Line On Dätwyler Holding's ROCE

To bring it all together, Dätwyler Holding has done well to increase the returns it's generating from its capital employed. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if Dätwyler Holding can keep these trends up, it could have a bright future ahead.

While Dätwyler Holding looks impressive, no company is worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether DAE is currently trading for a fair price.

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. 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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