Why You Should Care About CEWE Stiftung KGaA's (ETR:CWC) Strong Returns On Capital

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So, when we ran our eye over CEWE Stiftung KGaA's (ETR:CWC) trend of ROCE, we really liked what we saw.

What is Return On Capital Employed (ROCE)?

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. Analysts use this formula to calculate it for CEWE Stiftung KGaA:

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

0.21 = €83m ÷ (€625m - €231m) (Based on the trailing twelve months to December 2020).

So, CEWE Stiftung KGaA has an ROCE of 21%. In absolute terms that's a great return and it's even better than the Commercial Services industry average of 9.1%.

View our latest analysis for CEWE Stiftung KGaA

Above you can see how the current ROCE for CEWE Stiftung KGaA 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 report for CEWE Stiftung KGaA.

The Trend Of ROCE

In terms of CEWE Stiftung KGaA's history of ROCE, it's quite impressive. Over the past five years, ROCE has remained relatively flat at around 21% and the business has deployed 82% more capital into its operations. Now considering ROCE is an attractive 21%, this combination is actually pretty appealing because it means the business can consistently put money to work and generate these high returns. If CEWE Stiftung KGaA can keep this up, we'd be very optimistic about its future.

The Bottom Line On CEWE Stiftung KGaA's ROCE

CEWE Stiftung KGaA has demonstrated its proficiency by generating high returns on increasing amounts of capital employed, which we're thrilled about. And the stock has done incredibly well with a 158% return over the last five years, so long term investors are no doubt ecstatic with that result. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

If you want to continue researching CEWE Stiftung KGaA, you might be interested to know about the 1 warning sign that our analysis has discovered.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity.

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This article by Simply Wall St is general in nature. 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.
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