Returns At UMT United Mobility Technology (ETR:UMDK) Are On The Way Up

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. So on that note, UMT United Mobility Technology (ETR:UMDK) looks quite promising in regards to its trends of return on capital.

What is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for UMT United Mobility Technology:

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

0.12 = €6.4m ÷ (€57m - €1.7m) (Based on the trailing twelve months to June 2021).

So, UMT United Mobility Technology has an ROCE of 12%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Software industry average of 13%.

Check out our latest analysis for UMT United Mobility Technology

Historical performance is a great place to start when researching a stock so above you can see the gauge for UMT United Mobility Technology's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of UMT United Mobility Technology, check out these free graphs here.

So How Is UMT United Mobility Technology's ROCE Trending?

We like the trends that we're seeing from UMT United Mobility Technology. The data shows that returns on capital have increased substantially over the last five years to 12%. Basically the business is earning more per dollar of capital invested and in addition to that, 189% more capital is being employed now too. So we're very much inspired by what we're seeing at UMT United Mobility Technology thanks to its ability to profitably reinvest capital.

The Key Takeaway

To sum it up, UMT United Mobility Technology has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And since the stock has fallen 46% over the last five years, there might be an opportunity here. With that in mind, we believe the promising trends warrant this stock for further investigation.

If you'd like to know more about UMT United Mobility Technology, we've spotted 3 warning signs, and 1 of them shouldn't be ignored.

While UMT United Mobility Technology 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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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.