Investors Met With Slowing Returns on Capital At EMS-CHEMIE HOLDING (VTX:EMSN)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. Looking at EMS-CHEMIE HOLDING (VTX:EMSN), it does have a high ROCE right now, but lets see how returns are trending.

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Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for EMS-CHEMIE HOLDING, this is the formula:

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

0.25 = CHF545m ÷ (CHF2.5b - CHF258m) (Based on the trailing twelve months to June 2025).

So, EMS-CHEMIE HOLDING has an ROCE of 25%. In absolute terms that's a great return and it's even better than the Chemicals industry average of 10%.

Check out our latest analysis for EMS-CHEMIE HOLDING

In the above chart we have measured EMS-CHEMIE HOLDING'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 analyst report for EMS-CHEMIE HOLDING .

What The Trend Of ROCE Can Tell Us

Things have been pretty stable at EMS-CHEMIE HOLDING, with its capital employed and returns on that capital staying somewhat the same for the last five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So it may not be a multi-bagger in the making, but given the decent 25% return on capital, it'd be difficult to find fault with the business's current operations. On top of that you'll notice that EMS-CHEMIE HOLDING has been paying out a large portion (93%) of earnings in the form of dividends to shareholders. Most shareholders probably know this and own the stock for its dividend.

The Bottom Line On EMS-CHEMIE HOLDING's ROCE

Although is allocating it's capital efficiently to generate impressive returns, it isn't compounding its base of capital, which is what we'd see from a multi-bagger. And investors appear hesitant that the trends will pick up because the stock has fallen 23% in the last five years. Therefore based on the analysis done in this article, we don't think EMS-CHEMIE HOLDING has the makings of a multi-bagger.

One more thing to note, we've identified 1 warning sign with EMS-CHEMIE HOLDING and understanding it should be part of your investment process.

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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.