Returns Are Gaining Momentum At Lampsa Hellenic Hotels (ATH:LAMPS)

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. Speaking of which, we noticed some great changes in Lampsa Hellenic Hotels' (ATH:LAMPS) returns on capital, so let's have a look.

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What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Lampsa Hellenic Hotels:

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

0.12 = €30m ÷ (€279m - €39m) (Based on the trailing twelve months to December 2024).

Therefore, Lampsa Hellenic Hotels has an ROCE of 12%. By itself that's a normal return on capital and it's in line with the industry's average returns of 12%.

Check out our latest analysis for Lampsa Hellenic Hotels

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 Lampsa Hellenic Hotels has performed in the past in other metrics, you can view this free graph of Lampsa Hellenic Hotels' past earnings, revenue and cash flow.

What Can We Tell From Lampsa Hellenic Hotels' ROCE Trend?

Lampsa Hellenic Hotels' ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 102% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

In Conclusion...

To bring it all together, Lampsa Hellenic Hotels has done well to increase the returns it's generating from its capital employed. And a remarkable 125% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation for LAMPS on our platform that is definitely worth checking out.

While Lampsa Hellenic Hotels isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.