Returns At Kulmbacher Brauerei Aktien-Gesellschaft (MUN:KUL) Appear To Be Weighed Down

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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. However, after briefly looking over the numbers, we don't think Kulmbacher Brauerei Aktien-Gesellschaft (MUN:KUL) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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

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. The formula for this calculation on Kulmbacher Brauerei Aktien-Gesellschaft is:

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

0.064 = €9.5m ÷ (€234m - €87m) (Based on the trailing twelve months to June 2022).

Thus, Kulmbacher Brauerei Aktien-Gesellschaft has an ROCE of 6.4%. On its own, that's a low figure but it's around the 7.7% 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?

In terms of Kulmbacher Brauerei Aktien-Gesellschaft's historical ROCE trend, it doesn't exactly demand attention. Over the past five years, ROCE has remained relatively flat at around 6.4% and the business has deployed 52% more capital into its operations. 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.

Our Take On 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 declined 18% over the last five years, investors may not be too optimistic on this trend improving either. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

One more thing: We've identified 5 warning signs with Kulmbacher Brauerei Aktien-Gesellschaft (at least 1 which is concerning) , and understanding these would certainly be useful.

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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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.