The Returns On Capital At International School Augsburg -ISA- gemeinnützige (FRA:9JK) Don't Inspire Confidence

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Having said that, from a first glance at International School Augsburg -ISA- gemeinnützige (FRA:9JK) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

Understanding 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. Analysts use this formula to calculate it for International School Augsburg -ISA- gemeinnützige:

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

0.013 = €128k ÷ (€10m - €655k) (Based on the trailing twelve months to February 2024).

Thus, International School Augsburg -ISA- gemeinnützige has an ROCE of 1.3%. Ultimately, that's a low return and it under-performs the Consumer Services industry average of 13%.

See our latest analysis for International School Augsburg -ISA- gemeinnützige

Above you can see how the current ROCE for International School Augsburg -ISA- gemeinnützige 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 International School Augsburg -ISA- gemeinnützige for free.

How Are Returns Trending?

On the surface, the trend of ROCE at International School Augsburg -ISA- gemeinnützige doesn't inspire confidence. Around five years ago the returns on capital were 2.8%, but since then they've fallen to 1.3%. However it looks like International School Augsburg -ISA- gemeinnützige might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It may take some time before the company starts to see any change in earnings from these investments.

The Bottom Line On International School Augsburg -ISA- gemeinnützige's ROCE

In summary, International School Augsburg -ISA- gemeinnützige is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. And in the last three years, the stock has given away 16% so the market doesn't look too hopeful on these trends strengthening any time soon. 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.

One more thing: We've identified 3 warning signs with International School Augsburg -ISA- gemeinnützige (at least 2 which are significant) , and understanding them would certainly be useful.

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.

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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.