Slowing Rates Of Return At Eckert & Ziegler Strahlen- und Medizintechnik (ETR:EUZ) Leave Little Room For Excitement

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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. 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 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. 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 ÷ (€443m - €80m) (Based on the trailing twelve months to September 2023).

Therefore, Eckert & Ziegler Strahlen- und Medizintechnik has an ROCE of 11%. On its own, that's a standard return, however it's much better than the 6.6% generated by the Medical Equipment industry.

View our latest analysis for Eckert & Ziegler Strahlen- und Medizintechnik

Above you can see how the current ROCE for Eckert & Ziegler Strahlen- und Medizintechnik compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Eckert & Ziegler Strahlen- und Medizintechnik .

What Does the ROCE Trend For Eckert & Ziegler Strahlen- und Medizintechnik Tell Us?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has employed 91% more capital in the last five years, and the returns on that capital have remained stable at 11%. 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 Bottom Line

In the end, Eckert & Ziegler Strahlen- und Medizintechnik has proven its ability to adequately reinvest capital at good rates of return. Therefore it's no surprise that shareholders have earned a respectable 81% return if they held over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

Eckert & Ziegler Strahlen- und Medizintechnik could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for EUZ on our platform quite valuable.

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.