InterCard Informationssysteme (FRA:II8) Hasn't Managed To Accelerate Its Returns

What trends should we look for it we want to identify stocks that can multiply in value over the long term? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Although, when we looked at InterCard Informationssysteme (FRA:II8), it didn't seem to tick all of these boxes.

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. Analysts use this formula to calculate it for InterCard Informationssysteme:

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

0.087 = €1.2m ÷ (€19m - €5.2m) (Based on the trailing twelve months to December 2020).

So, InterCard Informationssysteme has an ROCE of 8.7%. In absolute terms, that's a low return but it's around the Tech industry average of 8.2%.

See our latest analysis for InterCard Informationssysteme

Historical performance is a great place to start when researching a stock so above you can see the gauge for InterCard Informationssysteme's ROCE against it's prior returns. If you're interested in investigating InterCard Informationssysteme's past further, check out this free graph of past earnings, revenue and cash flow.

What Can We Tell From InterCard Informationssysteme's ROCE Trend?

In terms of InterCard Informationssysteme's historical ROCE trend, it doesn't exactly demand attention. Over the past five years, ROCE has remained relatively flat at around 8.7% and the business has deployed 63% more capital into its operations. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

The Bottom Line On InterCard Informationssysteme's ROCE

As we've seen above, InterCard Informationssysteme's returns on capital haven't increased but it is reinvesting in the business. Unsurprisingly then, the total return to shareholders over the last five years has been flat. 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 separate note, we've found 3 warning signs for InterCard Informationssysteme you'll probably want to know about.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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