Here’s What’s Happening With Returns At NTR Holding (CPH:NTR B)

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at NTR Holding (CPH:NTR B) so let's look a bit deeper.

What is 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. To calculate this metric for NTR Holding, this is the formula:

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

0.053 = kr.7.2m ÷ (kr.149m - kr.14m) (Based on the trailing twelve months to September 2020).

Therefore, NTR Holding has an ROCE of 5.3%. In absolute terms, that's a low return and it also under-performs the Electrical industry average of 10%.

View our latest analysis for NTR Holding

Historical performance is a great place to start when researching a stock so above you can see the gauge for NTR Holding's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of NTR Holding, check out these free graphs here.

What Can We Tell From NTR Holding's ROCE Trend?

NTR Holding has not disappointed with their ROCE growth. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 192% in that same time. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

The Bottom Line On NTR Holding's ROCE

In summary, we're delighted to see that NTR Holding has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 78% return over the last five years. In light of that, we think it's worth looking further into this stock because if NTR Holding can keep these trends up, it could have a bright future ahead.

If you'd like to know about the risks facing NTR Holding, we've discovered 2 warning signs that you should be aware of.

While NTR Holding 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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