We Like These Underlying Trends At Gesundheitswelt Chiemgau (MUN:JTH)

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. 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 looked at Gesundheitswelt Chiemgau (MUN:JTH) and its trend of ROCE, we really liked what we saw.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Gesundheitswelt Chiemgau, this is the formula:

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

0.066 = €4.3m ÷ (€76m - €10m) (Based on the trailing twelve months to December 2019).

Therefore, Gesundheitswelt Chiemgau has an ROCE of 6.6%. Even though it's in line with the industry average of 6.9%, it's still a low return by itself.

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 want to delve into the historical earnings, revenue and cash flow of Gesundheitswelt Chiemgau, check out these free graphs here.

What Does the ROCE Trend For Gesundheitswelt Chiemgau Tell Us?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. Over the last five years, returns on capital employed have risen substantially to 6.6%. 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 226%. So we're very much inspired by what we're seeing at Gesundheitswelt Chiemgau thanks to its ability to profitably reinvest capital.

Our Take On Gesundheitswelt Chiemgau's ROCE

To sum it up, Gesundheitswelt Chiemgau has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a staggering 641% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

On a separate note, we've found 4 warning signs for Gesundheitswelt Chiemgau you'll probably want to 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. 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.
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