Returns On Capital At init innovation in traffic systems (ETR:IXX) Have Stalled

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So, when we ran our eye over init innovation in traffic systems' (ETR:IXX) trend of ROCE, we liked what we saw.

What is Return On Capital Employed (ROCE)?

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. To calculate this metric for init innovation in traffic systems, this is the formula:

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

0.13 = €19m ÷ (€227m - €74m) (Based on the trailing twelve months to December 2020).

So, init innovation in traffic systems has an ROCE of 13%. By itself that's a normal return on capital and it's in line with the industry's average returns of 13%.

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, you can check out the forecasts from the analysts covering init innovation in traffic systems here for free.

What Does the ROCE Trend For init innovation in traffic systems Tell Us?

While the current returns on capital are decent, they haven't changed much. The company has consistently earned 13% for the last five years, and the capital employed within the business has risen 68% in that time. 13% is a pretty standard return, and it provides some comfort knowing that init innovation in traffic systems has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

The Key Takeaway

To sum it up, init innovation in traffic systems has simply been reinvesting capital steadily, at those decent rates of return. And long term investors would be thrilled with the 139% return they've received over the last five years. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

If you'd like to know about the risks facing init innovation in traffic systems, we've discovered 2 warning signs that you should be aware of.

While init innovation in traffic systems 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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