naturenergie holding (VTX:NEAG) Is Experiencing Growth In Returns On Capital

There are a few key trends to look for if we want to identify the next multi-bagger. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, naturenergie holding (VTX:NEAG) looks quite promising in regards to its trends of return on capital.

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

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. Analysts use this formula to calculate it for naturenergie holding:

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

0.14 = €228m ÷ (€1.9b - €333m) (Based on the trailing twelve months to December 2024).

Therefore, naturenergie holding has an ROCE of 14%. In absolute terms, that's a satisfactory return, but compared to the Electric Utilities industry average of 6.9% it's much better.

Check out our latest analysis for naturenergie holding

Above you can see how the current ROCE for naturenergie holding compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering naturenergie holding for free.

What The Trend Of ROCE Can Tell Us

Investors would be pleased with what's happening at naturenergie holding. Over the last five years, returns on capital employed have risen substantially to 14%. The amount of capital employed has increased too, by 29%. So we're very much inspired by what we're seeing at naturenergie holding thanks to its ability to profitably reinvest capital.

The Bottom Line

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what naturenergie holding has. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 16% to shareholders. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

naturenergie holding does have some risks, we noticed 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

While naturenergie holding isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.