Returns On Capital At Progress-Werk Oberkirch (ETR:PWO) Have Hit The Brakes

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. Although, when we looked at Progress-Werk Oberkirch (ETR:PWO), it didn't seem to tick all of these boxes.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Progress-Werk Oberkirch is:

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

0.077 = €20m ÷ (€407m - €153m) (Based on the trailing twelve months to June 2022).

Thus, Progress-Werk Oberkirch has an ROCE of 7.7%. In absolute terms, that's a low return and it also under-performs the Auto Components industry average of 9.6%.

Check out our latest analysis for Progress-Werk Oberkirch

Above you can see how the current ROCE for Progress-Werk Oberkirch 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 Progress-Werk Oberkirch here for free.

So How Is Progress-Werk Oberkirch's ROCE Trending?

Over the past five years, Progress-Werk Oberkirch's ROCE and capital employed have both remained mostly flat. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. So don't be surprised if Progress-Werk Oberkirch doesn't end up being a multi-bagger in a few years time.

Our Take On Progress-Werk Oberkirch's ROCE

We can conclude that in regards to Progress-Werk Oberkirch's returns on capital employed and the trends, there isn't much change to report on. And investors appear hesitant that the trends will pick up because the stock has fallen 38% in the last five years. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.

On a final note, we found 3 warning signs for Progress-Werk Oberkirch (1 shouldn't be ignored) you should be aware of.

While Progress-Werk Oberkirch 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.