There's Been No Shortage Of Growth Recently For BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-'s (FRA:BLH) Returns On Capital

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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. So on that note, BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- (FRA:BLH) looks quite promising in regards to its trends of return on capital.

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 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).

Therefore, 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 11%.

Check out 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'd like to look at how BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- has performed in the past in other metrics, you can view this free graph of BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-'s past earnings, revenue and cash flow.

The Trend Of ROCE

We're delighted to see that BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- is reaping rewards from its investments and is now generating some pre-tax profits. About five years ago the company was generating losses but things have turned around because it's now earning 2.2% on its capital. And unsurprisingly, like most companies trying to break into the black, BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- is utilizing 138% more capital than it was five years ago. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

One more thing to note, BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- has decreased current liabilities to 24% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. So this improvement in ROCE has come from the business' underlying economics, which is great to see.

Our Take On BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-'s ROCE

To the delight of most shareholders, BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- has now broken into profitability. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 11% to shareholders. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- does have some risks, we noticed 5 warning signs (and 3 which are a bit concerning) we think you should know about.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com