Eckert & Ziegler Strahlen- und Medizintechnik (ETR:EUZ) Might Have The Makings Of A Multi-Bagger

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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, we've noticed some promising trends at Eckert & Ziegler Strahlen- und Medizintechnik (ETR:EUZ) so let's look a bit deeper.

Return On Capital Employed (ROCE): What is it?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested 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)

0.18 = €47m ÷ (€309m - €46m) (Based on the trailing twelve months to March 2021).

So, Eckert & Ziegler Strahlen- und Medizintechnik has an ROCE of 18%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Medical Equipment industry average of 17%.

See 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.

The Trend Of ROCE

Investors would be pleased with what's happening at Eckert & Ziegler Strahlen- und Medizintechnik. Over the last five years, returns on capital employed have risen substantially to 18%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 66%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

What We Can Learn From Eckert & Ziegler Strahlen- und Medizintechnik's ROCE

In summary, it's great to see that Eckert & Ziegler Strahlen- und Medizintechnik can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if Eckert & Ziegler Strahlen- und Medizintechnik can keep these trends up, it could have a bright future ahead.

If you'd like to know about the risks facing Eckert & Ziegler Strahlen- und Medizintechnik, we've discovered 1 warning sign that you should be aware of.

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