The Return Trends At Eckert & Ziegler Strahlen- und Medizintechnik (ETR:EUZ) Look Promising

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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.

What Is 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. The formula for this calculation on Eckert & Ziegler Strahlen- und Medizintechnik is:

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

0.11 = €40m ÷ (€420m - €68m) (Based on the trailing twelve months to March 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 9.5% 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'd like, you can check out the forecasts from the analysts covering Eckert & Ziegler Strahlen- und Medizintechnik here for free.

The Trend Of ROCE

The trends we've noticed at Eckert & Ziegler Strahlen- und Medizintechnik are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 11%. The amount of capital employed has increased too, by 90%. So we're very much inspired by what we're seeing at Eckert & Ziegler Strahlen- und Medizintechnik thanks to its ability to profitably reinvest capital.

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

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Eckert & Ziegler Strahlen- und Medizintechnik has. 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.

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation on our platform that is definitely worth checking out.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.