Mineralbrunnen Überkingen-Teinach GmbH KGaA (FRA:MUT) Hasn't Managed To Accelerate Its Returns

What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. However, after investigating Mineralbrunnen Überkingen-Teinach GmbH KGaA (FRA:MUT), we don't think it's current trends fit the mold of a multi-bagger.

What is 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. The formula for this calculation on Mineralbrunnen Überkingen-Teinach GmbH KGaA is:

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

0.064 = €8.6m ÷ (€142m - €7.1m) (Based on the trailing twelve months to December 2021).

So, Mineralbrunnen Überkingen-Teinach GmbH KGaA has an ROCE of 6.4%. On its own, that's a low figure but it's around the 6.8% average generated by the Beverage industry.

See our latest analysis for Mineralbrunnen Überkingen-Teinach GmbH KGaA

Historical performance is a great place to start when researching a stock so above you can see the gauge for Mineralbrunnen Überkingen-Teinach GmbH KGaA's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Mineralbrunnen Überkingen-Teinach GmbH KGaA, check out these free graphs here.

How Are Returns Trending?

There are better returns on capital out there than what we're seeing at Mineralbrunnen Überkingen-Teinach GmbH KGaA. Over the past five years, ROCE has remained relatively flat at around 6.4% and the business has deployed 25% more capital into its operations. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

The Key Takeaway

In summary, Mineralbrunnen Überkingen-Teinach GmbH KGaA has simply been reinvesting capital and generating the same low rate of return as before. Although the market must be expecting these trends to improve because the stock has gained 44% over the last five years. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.

If you'd like to know more about Mineralbrunnen Überkingen-Teinach GmbH KGaA, we've spotted 2 warning signs, and 1 of them shouldn't be ignored.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.