Slowing Rates Of Return At Bergbahnen Engelberg-Trübsee-Titlis (VTX:TIBN) Leave Little Room For Excitement

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. Although, when we looked at Bergbahnen Engelberg-Trübsee-Titlis (VTX:TIBN), it didn't seem to tick all of these boxes.

What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Bergbahnen Engelberg-Trübsee-Titlis:

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

0.10 = CHF18m ÷ (CHF197m - CHF18m) (Based on the trailing twelve months to April 2024).

Therefore, Bergbahnen Engelberg-Trübsee-Titlis has an ROCE of 10%. In absolute terms, that's a satisfactory return, but compared to the Hospitality industry average of 8.1% it's much better.

See our latest analysis for Bergbahnen Engelberg-Trübsee-Titlis

In the above chart we have measured Bergbahnen Engelberg-Trübsee-Titlis' prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Bergbahnen Engelberg-Trübsee-Titlis for free.

What Can We Tell From Bergbahnen Engelberg-Trübsee-Titlis' ROCE Trend?

Over the past five years, Bergbahnen Engelberg-Trübsee-Titlis' 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. So don't be surprised if Bergbahnen Engelberg-Trübsee-Titlis doesn't end up being a multi-bagger in a few years time. With fewer investment opportunities, it makes sense that Bergbahnen Engelberg-Trübsee-Titlis has been paying out a decent 57% of its earnings to shareholders. Unless businesses have highly compelling growth opportunities, they'll typically return some money to shareholders.

Our Take On Bergbahnen Engelberg-Trübsee-Titlis' ROCE

In a nutshell, Bergbahnen Engelberg-Trübsee-Titlis has been trudging along with the same returns from the same amount of capital over the last five years. Since the stock has declined 33% over the last five years, investors may not be too optimistic on this trend improving either. Therefore based on the analysis done in this article, we don't think Bergbahnen Engelberg-Trübsee-Titlis has the makings of a multi-bagger.

On a final note, we found 2 warning signs for Bergbahnen Engelberg-Trübsee-Titlis (1 is significant) you should be aware of.

While Bergbahnen Engelberg-Trübsee-Titlis may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.