Why We Like The Returns At Geberit (VTX:GEBN)

Published
August 08, 2022
SWX:GEBN
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Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. And in light of that, the trends we're seeing at Geberit's (VTX:GEBN) look very promising so lets take a look.

Return On Capital Employed (ROCE): What Is It?

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 Geberit:

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

0.31 = CHF899m ÷ (CHF3.8b - CHF908m) (Based on the trailing twelve months to March 2022).

Thus, Geberit has an ROCE of 31%. That's a fantastic return and not only that, it outpaces the average of 24% earned by companies in a similar industry.

View our latest analysis for Geberit

roce
SWX:GEBN Return on Capital Employed August 8th 2022

Above you can see how the current ROCE for Geberit 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 report on analyst forecasts for the company.

How Are Returns Trending?

Geberit's ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 49% in that same time. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

In Conclusion...

To sum it up, Geberit is collecting higher returns from the same amount of capital, and that's impressive. Since the stock has only returned 17% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. So with that in mind, we think the stock deserves further research.

If you want to continue researching Geberit, you might be interested to know about the 1 warning sign that our analysis has discovered.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

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