BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- (FRA:BLH) Is Looking To Continue Growing Its Returns On Capital

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. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, we've noticed some promising trends at BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- (FRA:BLH) so let's look a bit deeper.

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What Is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-:

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

0.022 = €22m ÷ (€1.3b - €312m) (Based on the trailing twelve months to December 2023).

So, BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- has an ROCE of 2.2%. Ultimately, that's a low return and it under-performs the Infrastructure industry average of 10%.

See our latest analysis for BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-

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 BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-'s past further, check out this free graph covering BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-'s past earnings, revenue and cash flow.

How Are Returns Trending?

BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses five years ago, but now it's earning 2.2% which is a sight for sore eyes. In addition to that, BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- is employing 138% more capital than previously which is expected of a company that's trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

In another part of our analysis, we noticed that the company's ratio of current liabilities to total assets decreased to 24%, which broadly means the business is relying less on its suppliers or short-term creditors to fund its operations. Therefore we can rest assured that the growth in ROCE is a result of the business' fundamental improvements, rather than a cooking class featuring this company's books.

What We Can Learn From BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-'s ROCE

Long story short, we're delighted to see that BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-'s reinvestment activities have paid off and the company is now profitable. Since the total return from the stock has been almost flat over the last five years, there might be an opportunity here if the valuation looks good. So researching this company further and determining whether or not these trends will continue seems justified.

BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- does have some risks, we noticed 5 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

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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.