Kulmbacher Brauerei Aktien-Gesellschaft (MUN:KUL) Has Some Way To Go To Become A Multi-Bagger

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. However, after investigating Kulmbacher Brauerei Aktien-Gesellschaft (MUN:KUL), we don't think it's current trends fit the mold of a multi-bagger.

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. Analysts use this formula to calculate it for Kulmbacher Brauerei Aktien-Gesellschaft:

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

0.069 = €10m ÷ (€229m - €83m) (Based on the trailing twelve months to December 2020).

So, Kulmbacher Brauerei Aktien-Gesellschaft has an ROCE of 6.9%. On its own, that's a low figure but it's around the 6.2% average generated by the Beverage industry.

See our latest analysis for Kulmbacher Brauerei Aktien-Gesellschaft

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Kulmbacher Brauerei Aktien-Gesellschaft has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What Can We Tell From Kulmbacher Brauerei Aktien-Gesellschaft's ROCE Trend?

There are better returns on capital out there than what we're seeing at Kulmbacher Brauerei Aktien-Gesellschaft. The company has consistently earned 6.9% for the last five years, and the capital employed within the business has risen 59% in that time. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

What We Can Learn From Kulmbacher Brauerei Aktien-Gesellschaft's ROCE

As we've seen above, Kulmbacher Brauerei Aktien-Gesellschaft's returns on capital haven't increased but it is reinvesting in the business. Since the stock has gained an impressive 93% over the last five years, investors must think there's better things to come. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

Like most companies, Kulmbacher Brauerei Aktien-Gesellschaft does come with some risks, and we've found 1 warning sign that you should be aware of.

While Kulmbacher Brauerei Aktien-Gesellschaft 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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