The Trends At Chocoladefabriken Lindt & Sprüngli (VTX:LISN) That You Should Know About

There are a few key trends to look for if we want to identify the next 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Having said that, from a first glance at Chocoladefabriken Lindt & Sprüngli (VTX:LISN) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

Return On Capital Employed (ROCE): What is it?

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 Chocoladefabriken Lindt & Sprüngli:

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

0.097 = CHF571m ÷ (CHF7.4b - CHF1.5b) (Based on the trailing twelve months to June 2020).

Thus, Chocoladefabriken Lindt & Sprüngli has an ROCE of 9.7%. On its own that's a low return on capital but it's in line with the industry's average returns of 9.7%.

Check out our latest analysis for Chocoladefabriken Lindt & Sprüngli

In the above chart we have measured Chocoladefabriken Lindt & Sprüngli's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Chocoladefabriken Lindt & Sprüngli.

What Does the ROCE Trend For Chocoladefabriken Lindt & Sprüngli Tell Us?

There are better returns on capital out there than what we're seeing at Chocoladefabriken Lindt & Sprüngli. Over the past five years, ROCE has remained relatively flat at around 9.7% and the business has deployed 31% more capital into its operations. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

The Bottom Line On Chocoladefabriken Lindt & Sprüngli's ROCE

In conclusion, Chocoladefabriken Lindt & Sprüngli has been investing more capital into the business, but returns on that capital haven't increased. And with the stock having returned a mere 34% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

While Chocoladefabriken Lindt & Sprüngli doesn't shine too bright in this respect, it's still worth seeing if the company is trading at attractive prices. You can find that out with our FREE intrinsic value estimation on our platform.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

When trading Chocoladefabriken Lindt & Sprüngli or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.