Returns On Capital At Müller - Die lila Logistik (ETR:MLL) Paint A Concerning Picture

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. In light of that, when we looked at Müller - Die lila Logistik (ETR:MLL) and its ROCE trend, we weren't exactly thrilled.

Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Müller - Die lila Logistik:

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

0.042 = €3.8m ÷ (€128m - €37m) (Based on the trailing twelve months to December 2020).

So, Müller - Die lila Logistik has an ROCE of 4.2%. Ultimately, that's a low return and it under-performs the Logistics industry average of 8.8%.

See our latest analysis for Müller - Die lila Logistik

Historical performance is a great place to start when researching a stock so above you can see the gauge for Müller - Die lila Logistik's ROCE against it's prior returns. If you'd like to look at how Müller - Die lila Logistik has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

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

On the surface, the trend of ROCE at Müller - Die lila Logistik doesn't inspire confidence. To be more specific, ROCE has fallen from 5.5% over the last five years. Meanwhile, the business is utilizing more capital but this hasn't moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It may take some time before the company starts to see any change in earnings from these investments.

Our Take On Müller - Die lila Logistik's ROCE

To conclude, we've found that Müller - Die lila Logistik is reinvesting in the business, but returns have been falling. And investors may be recognizing these trends since the stock has only returned a total of 8.9% to shareholders over the last five years. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

One more thing: We've identified 4 warning signs with Müller - Die lila Logistik (at least 1 which is potentially serious) , and understanding these would certainly be useful.

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. 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.
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