The Return Trends At LUDWIG BECK am Rathauseck - Textilhaus Feldmeier (ETR:ECK) Look Promising

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, 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. Speaking of which, we noticed some great changes in LUDWIG BECK am Rathauseck - Textilhaus Feldmeier's (ETR:ECK) returns on capital, so let's have a look.

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. The formula for this calculation on LUDWIG BECK am Rathauseck - Textilhaus Feldmeier is:

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

0.025 = €3.2m ÷ (€170m - €43m) (Based on the trailing twelve months to September 2024).

Therefore, LUDWIG BECK am Rathauseck - Textilhaus Feldmeier has an ROCE of 2.5%. In absolute terms, that's a low return and it also under-performs the Multiline Retail industry average of 11%.

Check out our latest analysis for LUDWIG BECK am Rathauseck - Textilhaus Feldmeier

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're interested in investigating LUDWIG BECK am Rathauseck - Textilhaus Feldmeier's past further, check out this free graph covering LUDWIG BECK am Rathauseck - Textilhaus Feldmeier's past earnings, revenue and cash flow.

What Can We Tell From LUDWIG BECK am Rathauseck - Textilhaus Feldmeier's ROCE Trend?

LUDWIG BECK am Rathauseck - Textilhaus Feldmeier has broken into the black (profitability) and we're sure it's a sight for sore eyes. The company now earns 2.5% on its capital, because five years ago it was incurring losses. On top of that, what's interesting is that the amount of capital being employed has remained steady, so the business hasn't needed to put any additional money to work to generate these higher returns. That being said, while an increase in efficiency is no doubt appealing, it'd be helpful to know if the company does have any investment plans going forward. So if you're looking for high growth, you'll want to see a business's capital employed also increasing.

In Conclusion...

To bring it all together, LUDWIG BECK am Rathauseck - Textilhaus Feldmeier has done well to increase the returns it's generating from its capital employed. Astute investors may have an opportunity here because the stock has declined 36% in the last five years. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

On a final note, we found 4 warning signs for LUDWIG BECK am Rathauseck - Textilhaus Feldmeier (1 is a bit concerning) you should be aware of.

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.