BHB Brauholding Bayern-Mitte (FRA:B9B) Shareholders Will Want The ROCE Trajectory To Continue

There are a few key trends to look for if we want to identify the next multi-bagger. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, we've noticed some promising trends at BHB Brauholding Bayern-Mitte (FRA:B9B) so let's look a bit deeper.

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

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. To calculate this metric for BHB Brauholding Bayern-Mitte, this is the formula:

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

0.036 = €474k ÷ (€15m - €1.9m) (Based on the trailing twelve months to June 2023).

Thus, BHB Brauholding Bayern-Mitte has an ROCE of 3.6%. In absolute terms, that's a low return and it also under-performs the Beverage industry average of 5.9%.

Check out our latest analysis for BHB Brauholding Bayern-Mitte

Above you can see how the current ROCE for BHB Brauholding Bayern-Mitte compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

The Trend Of ROCE

While the ROCE isn't as high as some other companies out there, it's great to see it's on the up. The figures show that over the last five years, ROCE has grown 28% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

Our Take On BHB Brauholding Bayern-Mitte's ROCE

To sum it up, BHB Brauholding Bayern-Mitte is collecting higher returns from the same amount of capital, and that's impressive. Considering the stock has delivered 1.6% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. So with that in mind, we think the stock deserves further research.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 2 warning signs for BHB Brauholding Bayern-Mitte (of which 1 is significant!) that you should know about.

While BHB Brauholding Bayern-Mitte 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.