The Return Trends At TeamViewer (ETR:TMV) Look Promising

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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 on that note, TeamViewer (ETR:TMV) looks quite promising in regards to its trends of return on capital.

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. Analysts use this formula to calculate it for TeamViewer:

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

0.092 = €111m ÷ (€1.5b - €311m) (Based on the trailing twelve months to September 2021).

Therefore, TeamViewer has an ROCE of 9.2%. In absolute terms, that's a low return and it also under-performs the Software industry average of 12%.

View our latest analysis for TeamViewer

In the above chart we have measured TeamViewer's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for TeamViewer.

The Trend Of ROCE

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. Over the last four years, returns on capital employed have risen substantially to 9.2%. 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 102%. So we're very much inspired by what we're seeing at TeamViewer thanks to its ability to profitably reinvest capital.

On a related note, the company's ratio of current liabilities to total assets has decreased to 20%, which basically reduces it's funding from the likes of short-term creditors or suppliers. This tells us that TeamViewer has grown its returns without a reliance on increasing their current liabilities, which we're very happy with.

The Key Takeaway

All in all, it's terrific to see that TeamViewer is reaping the rewards from prior investments and is growing its capital base. And since the stock has fallen 69% over the last year, there might be an opportunity here. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

On a separate note, we've found 3 warning signs for TeamViewer you'll probably want to know about.

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.

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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.