Returns Are Gaining Momentum At Gesundheitswelt Chiemgau (MUN:JTH)

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. With that in mind, we've noticed some promising trends at Gesundheitswelt Chiemgau (MUN:JTH) so let's look a bit deeper.

What Is 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 Gesundheitswelt Chiemgau:

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

0.066 = €4.4m ÷ (€77m - €10m) (Based on the trailing twelve months to December 2022).

Therefore, Gesundheitswelt Chiemgau has an ROCE of 6.6%. On its own, that's a low figure but it's around the 6.0% average generated by the Healthcare industry.

Check out our latest analysis for Gesundheitswelt Chiemgau

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 Gesundheitswelt Chiemgau has performed in the past in other metrics, you can view this free graph of Gesundheitswelt Chiemgau's past earnings, revenue and cash flow.

What Does the ROCE Trend For Gesundheitswelt Chiemgau Tell Us?

Gesundheitswelt Chiemgau has not disappointed with their ROCE growth. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 44% over the last five years. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

The Bottom Line

To sum it up, Gesundheitswelt Chiemgau is collecting higher returns from the same amount of capital, and that's impressive. And with a respectable 64% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. Therefore, we think it would be worth your time to check if these trends are going to continue.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 4 warning signs for Gesundheitswelt Chiemgau (of which 1 is potentially serious!) that you should know about.

While Gesundheitswelt Chiemgau may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.