Slowing Rates Of Return At Sicher Elevator (SZSE:301056) Leave Little Room For Excitement

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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. So, when we ran our eye over Sicher Elevator's (SZSE:301056) trend of ROCE, we liked what we saw.

What Is 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 Sicher Elevator, this is the formula:

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

0.11 = CN¥94m ÷ (CN¥1.4b - CN¥533m) (Based on the trailing twelve months to March 2024).

Thus, Sicher Elevator has an ROCE of 11%. On its own, that's a standard return, however it's much better than the 5.6% generated by the Machinery industry.

See our latest analysis for Sicher Elevator

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

What Can We Tell From Sicher Elevator's ROCE Trend?

While the current returns on capital are decent, they haven't changed much. The company has employed 118% more capital in the last five years, and the returns on that capital have remained stable at 11%. Since 11% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

On a side note, Sicher Elevator has done well to reduce current liabilities to 38% of total assets over the last five years. Effectively suppliers now fund less of the business, which can lower some elements of risk.

In Conclusion...

In the end, Sicher Elevator has proven its ability to adequately reinvest capital at good rates of return. Yet over the last year the stock has declined 13%, so the decline might provide an opening. That's why we think it'd be worthwhile to look further into this stock given the fundamentals are appealing.

On a separate note, we've found 2 warning signs for Sicher Elevator you'll probably want to know about.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.