Returns Are Gaining Momentum At Dottikon ES Holding (VTX:DESN)

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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. With that in mind, we've noticed some promising trends at Dottikon ES Holding (VTX:DESN) so let's look a bit deeper.

Understanding 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 Dottikon ES Holding:

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

0.11 = CHF96m ÷ (CHF1.1b - CHF153m) (Based on the trailing twelve months to March 2023).

Therefore, Dottikon ES Holding has an ROCE of 11%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Chemicals industry average of 12%.

View our latest analysis for Dottikon ES Holding

Historical performance is a great place to start when researching a stock so above you can see the gauge for Dottikon ES Holding's ROCE against it's prior returns. If you're interested in investigating Dottikon ES Holding's past further, check out this free graph of past earnings, revenue and cash flow.

So How Is Dottikon ES Holding's ROCE Trending?

The trends we've noticed at Dottikon ES Holding are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 11%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 132%. So we're very much inspired by what we're seeing at Dottikon ES Holding thanks to its ability to profitably reinvest capital.

The Key Takeaway

All in all, it's terrific to see that Dottikon ES Holding is reaping the rewards from prior investments and is growing its capital base. And a remarkable 275% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

If you'd like to know more about Dottikon ES Holding, we've spotted 2 warning signs, and 1 of them is significant.

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. 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.