Returns Are Gaining Momentum At ZEAL Network (ETR:TIMA)

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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 on that note, ZEAL Network (ETR:TIMA) looks quite promising in regards to its trends of return on capital.

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Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for ZEAL Network, this is the formula:

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

0.17 = €62m ÷ (€451m - €79m) (Based on the trailing twelve months to March 2025).

Thus, ZEAL Network has an ROCE of 17%. In absolute terms, that's a satisfactory return, but compared to the Hospitality industry average of 6.6% it's much better.

Check out our latest analysis for ZEAL Network

In the above chart we have measured ZEAL Network's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering ZEAL Network for free.

What Does the ROCE Trend For ZEAL Network Tell Us?

You'd find it hard not to be impressed with the ROCE trend at ZEAL Network. We found that the returns on capital employed over the last five years have risen by 2,550%. The company is now earning €0.2 per dollar of capital employed. Interestingly, the business may be becoming more efficient because it's applying 21% less capital than it was five years ago. A business that's shrinking its asset base like this isn't usually typical of a soon to be multi-bagger company.

The Key Takeaway

In summary, it's great to see that ZEAL Network has been able to turn things around and earn higher returns on lower amounts of capital. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 91% return over the last five years. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

ZEAL Network does have some risks though, and we've spotted 1 warning sign for ZEAL Network that you might be interested in.

While ZEAL Network may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.