Investors Met With Slowing Returns on Capital At Flughafen Zürich (VTX:FHZN)

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. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. In light of that, when we looked at Flughafen Zürich (VTX:FHZN) and its ROCE trend, we weren't exactly thrilled.

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Return On Capital Employed (ROCE): What Is It?

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. The formula for this calculation on Flughafen Zürich is:

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

0.091 = CHF441m ÷ (CHF5.2b - CHF339m) (Based on the trailing twelve months to December 2024).

Thus, Flughafen Zürich has an ROCE of 9.1%. In absolute terms, that's a low return but it's around the Infrastructure industry average of 10%.

Check out our latest analysis for Flughafen Zürich

Above you can see how the current ROCE for Flughafen Zürich compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Flughafen Zürich .

What Can We Tell From Flughafen Zürich's ROCE Trend?

In terms of Flughafen Zürich's historical ROCE trend, it doesn't exactly demand attention. The company has employed 21% more capital in the last five years, and the returns on that capital have remained stable at 9.1%. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

The Key Takeaway

In conclusion, Flughafen Zürich has been investing more capital into the business, but returns on that capital haven't increased. Yet to long term shareholders the stock has gifted them an incredible 109% return in the last five years, so the market appears to be rosy about its future. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.

On a final note, we've found 1 warning sign for Flughafen Zürich that we think you should be aware of.

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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.