The Return Trends At Intereuropa d.d (LJSE:IEKG) Look Promising

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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Intereuropa d.d (LJSE:IEKG) looks quite promising in regards to its trends of return on capital.

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. The formula for this calculation on Intereuropa d.d is:

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

0.032 = €6.3m ÷ (€228m - €34m) (Based on the trailing twelve months to September 2021).

Therefore, Intereuropa d.d has an ROCE of 3.2%. In absolute terms, that's a low return and it also under-performs the Logistics industry average of 15%.

See our latest analysis for Intereuropa d.d

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

How Are Returns Trending?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. We found that the returns on capital employed over the last five years have risen by 27%. That's a very favorable trend because this means that the company is earning more per dollar of capital that's being employed. In regards to capital employed, Intereuropa d.d appears to been achieving more with less, since the business is using 24% less capital to run its operation. Intereuropa d.d may be selling some assets so it's worth investigating if the business has plans for future investments to increase returns further still.

The Bottom Line

From what we've seen above, Intereuropa d.d has managed to increase it's returns on capital all the while reducing it's capital base. And given the stock has remained rather flat over the last five years, there might be an opportunity here if other metrics are strong. So researching this company further and determining whether or not these trends will continue seems justified.

One more thing, we've spotted 3 warning signs facing Intereuropa d.d that you might find interesting.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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

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.