Eckert & Ziegler Strahlen- und Medizintechnik (ETR:EUZ) Hasn't Managed To Accelerate Its Returns

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. So, when we ran our eye over Eckert & Ziegler Strahlen- und Medizintechnik's (ETR:EUZ) trend of ROCE, we liked what we saw.

Understanding Return On Capital Employed (ROCE)

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. Analysts use this formula to calculate it for Eckert & Ziegler Strahlen- und Medizintechnik:

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

0.11 = €39m ÷ (€433m - €80m) (Based on the trailing twelve months to June 2023).

Therefore, Eckert & Ziegler Strahlen- und Medizintechnik has an ROCE of 11%. In absolute terms, that's a satisfactory return, but compared to the Medical Equipment industry average of 6.5% it's much better.

Check out our latest analysis for Eckert & Ziegler Strahlen- und Medizintechnik

In the above chart we have measured Eckert & Ziegler Strahlen- und Medizintechnik's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Eckert & Ziegler Strahlen- und Medizintechnik.

How Are Returns Trending?

While the current returns on capital are decent, they haven't changed much. The company has consistently earned 11% for the last five years, and the capital employed within the business has risen 89% in that time. 11% is a pretty standard return, and it provides some comfort knowing that Eckert & Ziegler Strahlen- und Medizintechnik has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

The Key Takeaway

The main thing to remember is that Eckert & Ziegler Strahlen- und Medizintechnik has proven its ability to continually reinvest at respectable rates of return. And the stock has done incredibly well with a 213% return over the last five years, so long term investors are no doubt ecstatic with that result. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

While Eckert & Ziegler Strahlen- und Medizintechnik doesn't shine too bright in this respect, it's still worth seeing if the company is trading at attractive prices. You can find that out with our FREE intrinsic value estimation on our platform.

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.