Müller - Die lila Logistik (ETR:MLL) Shareholders Will Want The ROCE Trajectory To Continue

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. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at Müller - Die lila Logistik (ETR:MLL) and its trend of ROCE, we really liked what we saw.

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. The formula for this calculation on Müller - Die lila Logistik is:

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

0.051 = €7.6m ÷ (€208m - €60m) (Based on the trailing twelve months to June 2024).

So, Müller - Die lila Logistik has an ROCE of 5.1%. Ultimately, that's a low return and it under-performs the Logistics industry average of 12%.

Check out our latest analysis for Müller - Die lila Logistik

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating Müller - Die lila Logistik's past further, check out this free graph covering Müller - Die lila Logistik's past earnings, revenue and cash flow.

So How Is Müller - Die lila Logistik's ROCE Trending?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The data shows that returns on capital have increased substantially over the last five years to 5.1%. Basically the business is earning more per dollar of capital invested and in addition to that, 79% more capital is being employed now too. So we're very much inspired by what we're seeing at Müller - Die lila Logistik thanks to its ability to profitably reinvest capital.

What We Can Learn From Müller - Die lila Logistik's ROCE

To sum it up, Müller - Die lila Logistik 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 33% 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.

Müller - Die lila Logistik does come with some risks though, we found 4 warning signs in our investment analysis, and 2 of those are significant...

While Müller - Die lila Logistik 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.