B+S Banksysteme's (ETR:DTD2) Returns Have Hit A Wall

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Having said that, from a first glance at B+S Banksysteme (ETR:DTD2) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on B+S Banksysteme is:

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

0.032 = €606k ÷ (€25m - €6.1m) (Based on the trailing twelve months to December 2023).

Thus, B+S Banksysteme has an ROCE of 3.2%. Ultimately, that's a low return and it under-performs the Software industry average of 14%.

Check out our latest analysis for B+S Banksysteme

Above you can see how the current ROCE for B+S Banksysteme 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 B+S Banksysteme for free.

So How Is B+S Banksysteme's ROCE Trending?

There hasn't been much to report for B+S Banksysteme's returns and its level of capital employed because both metrics have been steady for the past five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So unless we see a substantial change at B+S Banksysteme in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

Our Take On B+S Banksysteme's ROCE

We can conclude that in regards to B+S Banksysteme's returns on capital employed and the trends, there isn't much change to report on. And in the last five years, the stock has given away 36% so the market doesn't look too hopeful on these trends strengthening any time soon. On the whole, we aren't too inspired by the underlying trends and we think there may be better chances of finding a multi-bagger elsewhere.

On a final note, we've found 1 warning sign for B+S Banksysteme that we think you should be aware of.

While B+S Banksysteme 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.

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.