We Like These Underlying Return On Capital Trends At Liburnia Riviera Hoteli d.d (ZGSE:LRH)

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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 Liburnia Riviera Hoteli d.d's (ZGSE:LRH) returns on capital, so let's have a look.

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What Is 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. The formula for this calculation on Liburnia Riviera Hoteli d.d is:

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

0.052 = €5.4m ÷ (€117m - €14m) (Based on the trailing twelve months to March 2025).

Thus, Liburnia Riviera Hoteli d.d has an ROCE of 5.2%. In absolute terms, that's a low return but it's around the Hospitality industry average of 5.7%.

See our latest analysis for Liburnia Riviera Hoteli d.d

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 Liburnia Riviera Hoteli d.d's past further, check out this free graph covering Liburnia Riviera Hoteli d.d's past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

Liburnia Riviera Hoteli d.d has not disappointed with their ROCE growth. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 430% over the last five years. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

Our Take On Liburnia Riviera Hoteli d.d's ROCE

As discussed above, Liburnia Riviera Hoteli d.d appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. 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.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 2 warning signs for Liburnia Riviera Hoteli d.d (of which 1 is a bit concerning!) that 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.