init innovation in traffic systems' (ETR:IXX) Returns On Capital Are Heading Higher

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, init innovation in traffic systems (ETR:IXX) looks quite promising in regards to its trends of return on capital.

Understanding 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 init innovation in traffic systems:

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

0.11 = €21m ÷ (€260m - €78m) (Based on the trailing twelve months to December 2023).

Therefore, init innovation in traffic systems has an ROCE of 11%. In absolute terms, that's a pretty standard return but compared to the Software industry average it falls behind.

View our latest analysis for init innovation in traffic systems

Above you can see how the current ROCE for init innovation in traffic systems compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for init innovation in traffic systems .

What Can We Tell From init innovation in traffic systems' ROCE Trend?

init innovation in traffic systems is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 11%. The amount of capital employed has increased too, by 64%. So we're very much inspired by what we're seeing at init innovation in traffic systems thanks to its ability to profitably reinvest capital.

The Bottom Line On init innovation in traffic systems' ROCE

In summary, it's great to see that init innovation in traffic systems can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Since the stock has returned a staggering 184% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if init innovation in traffic systems can keep these trends up, it could have a bright future ahead.

If you want to continue researching init innovation in traffic systems, you might be interested to know about the 1 warning sign that our analysis has discovered.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.