Thermador Groupe (EPA:THEP) Is Achieving High Returns On Its Capital

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look 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, the ROCE of Thermador Groupe (EPA:THEP) looks great, so lets see what the trend can tell us.

Understanding 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 Thermador Groupe:

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

0.22 = €80m ÷ (€507m - €138m) (Based on the trailing twelve months to December 2022).

Therefore, Thermador Groupe has an ROCE of 22%. That's a fantastic return and not only that, it outpaces the average of 16% earned by companies in a similar industry.

Check out our latest analysis for Thermador Groupe

Above you can see how the current ROCE for Thermador Groupe compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Thermador Groupe.

SWOT Analysis for Thermador Groupe

How Are Returns Trending?

The trends we've noticed at Thermador Groupe are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 22%. The amount of capital employed has increased too, by 69%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

What We Can Learn From Thermador Groupe's ROCE

All in all, it's terrific to see that Thermador Groupe is reaping the rewards from prior investments and is growing its capital base. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 70% return over the last five years. In light of that, we think it's worth looking further into this stock because if Thermador Groupe can keep these trends up, it could have a bright future ahead.

One more thing to note, we've identified 1 warning sign with Thermador Groupe and understanding this should be part of your investment process.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets 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.