The Returns At Hamburger Hafen und Logistik (ETR:HHFA) Aren't Growing

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. However, after briefly looking over the numbers, we don't think Hamburger Hafen und Logistik (ETR:HHFA) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

Understanding 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 Hamburger Hafen und Logistik, this is the formula:

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

0.097 = €232m ÷ (€2.8b - €364m) (Based on the trailing twelve months to September 2022).

So, Hamburger Hafen und Logistik has an ROCE of 9.7%. In absolute terms, that's a low return but it's around the Infrastructure industry average of 8.5%.

Check out our latest analysis for Hamburger Hafen und Logistik

Above you can see how the current ROCE for Hamburger Hafen und Logistik 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 report for Hamburger Hafen und Logistik.

What Does the ROCE Trend For Hamburger Hafen und Logistik Tell Us?

The returns on capital haven't changed much for Hamburger Hafen und Logistik in recent years. The company has employed 49% more capital in the last five years, and the returns on that capital have remained stable at 9.7%. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

Our Take On Hamburger Hafen und Logistik's ROCE

As we've seen above, Hamburger Hafen und Logistik's returns on capital haven't increased but it is reinvesting in the business. Since the stock has declined 27% over the last five years, investors may not be too optimistic on this trend improving either. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.

If you'd like to know more about Hamburger Hafen und Logistik, we've spotted 3 warning signs, and 1 of them is a bit concerning.

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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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.