Schweiter Technologies (VTX:SWTQ) Has More To Do To Multiply In Value Going Forward

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. In light of that, when we looked at Schweiter Technologies (VTX:SWTQ) and its ROCE trend, we weren't exactly thrilled.

What Is 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. Analysts use this formula to calculate it for Schweiter Technologies:

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

0.098 = CHF88m ÷ (CHF1.1b - CHF235m) (Based on the trailing twelve months to June 2022).

Therefore, Schweiter Technologies has an ROCE of 9.8%. In absolute terms, that's a low return and it also under-performs the Building industry average of 24%.

View our latest analysis for Schweiter Technologies

Above you can see how the current ROCE for Schweiter Technologies compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Schweiter Technologies.

So How Is Schweiter Technologies' ROCE Trending?

Over the past five years, Schweiter Technologies' ROCE and capital employed have both remained mostly flat. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. With that in mind, unless investment picks up again in the future, we wouldn't expect Schweiter Technologies to be a multi-bagger going forward. That probably explains why Schweiter Technologies has been paying out 68% of its earnings as dividends to shareholders. Most shareholders probably know this and own the stock for its dividend.

In Conclusion...

In a nutshell, Schweiter Technologies has been trudging along with the same returns from the same amount of capital over the last five years. And investors may be recognizing these trends since the stock has only returned a total of 3.0% to shareholders over the last five years. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

On a final note, we've found 2 warning signs for Schweiter Technologies that we think you should be aware of.

While Schweiter Technologies 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. 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.