Capital Allocation Trends At Landis+Gyr Group (VTX:LAND) Aren't Ideal

What financial metrics can indicate to us that a company is maturing or even in decline? Businesses in decline often have two underlying trends, firstly, a declining return on capital employed (ROCE) and a declining base of capital employed. This combination can tell you that not only is the company investing less, it's earning less on what it does invest. So after we looked into Landis+Gyr Group (VTX:LAND), the trends above didn't look too great.

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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. The formula for this calculation on Landis+Gyr Group is:

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

0.047 = US$85m ÷ (US$2.4b - US$584m) (Based on the trailing twelve months to March 2025).

So, Landis+Gyr Group has an ROCE of 4.7%. Ultimately, that's a low return and it under-performs the Electronic industry average of 14%.

See our latest analysis for Landis+Gyr Group

In the above chart we have measured Landis+Gyr Group's 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 Landis+Gyr Group for free.

What Does the ROCE Trend For Landis+Gyr Group Tell Us?

In terms of Landis+Gyr Group's historical ROCE movements, the trend doesn't inspire confidence. Unfortunately the returns on capital have diminished from the 7.9% that they were earning five years ago. Meanwhile, capital employed in the business has stayed roughly the flat over the period. This combination can be indicative of a mature business that still has areas to deploy capital, but the returns received aren't as high due potentially to new competition or smaller margins. If these trends continue, we wouldn't expect Landis+Gyr Group to turn into a multi-bagger.

What We Can Learn From Landis+Gyr Group's ROCE

In the end, the trend of lower returns on the same amount of capital isn't typically an indication that we're looking at a growth stock. But investors must be expecting an improvement of sorts because over the last five yearsthe stock has delivered a respectable 65% return. Regardless, we don't feel too comfortable with the fundamentals so we'd be steering clear of this stock for now.

Landis+Gyr Group could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for LAND on our platform quite valuable.

While Landis+Gyr 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.