Returns On Capital At Müller - Die lila Logistik (ETR:MLL) Have Hit The Brakes

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after briefly looking over the numbers, we don't think Müller - Die lila Logistik (ETR:MLL) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Müller - Die lila Logistik, this is the formula:

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

0.046 = €6.6m ÷ (€201m - €57m) (Based on the trailing twelve months to December 2024).

Thus, Müller - Die lila Logistik has an ROCE of 4.6%. Ultimately, that's a low return and it under-performs the Logistics industry average of 14%.

See 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.

The Trend Of ROCE

In terms of Müller - Die lila Logistik's historical ROCE trend, it doesn't exactly demand attention. The company has employed 79% more capital in the last five years, and the returns on that capital have remained stable at 4.6%. 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 Key Takeaway

In summary, Müller - Die lila Logistik has simply been reinvesting capital and generating the same low rate of return as before. And in the last five years, the stock has given away 22% so the market doesn't look too hopeful on these trends strengthening any time soon. 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.

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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.