We Like These Underlying Return On Capital Trends At MCH Group (VTX:MCHN)

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, we've noticed some promising trends at MCH Group (VTX:MCHN) so let's look a bit deeper.

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Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for MCH Group:

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

0.066 = CHF15m ÷ (CHF371m - CHF138m) (Based on the trailing twelve months to June 2025).

So, MCH Group has an ROCE of 6.6%. In absolute terms, that's a low return and it also under-performs the Media industry average of 11%.

Check out our latest analysis for MCH Group

Historical performance is a great place to start when researching a stock so above you can see the gauge for MCH Group's ROCE against it's prior returns. If you'd like to look at how MCH Group has performed in the past in other metrics, you can view this free graph of MCH Group's past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

Like most people, we're pleased that MCH Group is now generating some pretax earnings. The company was generating losses five years ago, but now it's turned around, earning 6.6% which is no doubt a relief for some early shareholders. In regards to capital employed, MCH Group is using 26% less capital than it was five years ago, which on the surface, can indicate that the business has become more efficient at generating these returns. This could potentially mean that the company is selling some of its assets.

For the record though, there was a noticeable increase in the company's current liabilities over the period, so we would attribute some of the ROCE growth to that. The current liabilities has increased to 37% of total assets, so the business is now more funded by the likes of its suppliers or short-term creditors. Keep an eye out for future increases because when the ratio of current liabilities to total assets gets particularly high, this can introduce some new risks for the business.

What We Can Learn From MCH Group's ROCE

In summary, it's great to see that MCH Group has been able to turn things around and earn higher returns on lower amounts of capital. Given the stock has declined 69% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. So researching this company further and determining whether or not these trends will continue seems justified.

If you want to continue researching MCH Group, you might be interested to know about the 1 warning sign that our analysis has discovered.

While MCH Group 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.