Returns At MYT Netherlands Parent B.V (NYSE:MYTE) Are On The Way Up

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in MYT Netherlands Parent B.V's (NYSE:MYTE) returns on capital, so let's have a look.

Return On Capital Employed (ROCE): What Is It?

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 MYT Netherlands Parent B.V:

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

0.12 = €55m ÷ (€615m - €162m) (Based on the trailing twelve months to June 2022).

Therefore, MYT Netherlands Parent B.V has an ROCE of 12%. In absolute terms, that's a pretty standard return but compared to the Specialty Retail industry average it falls behind.

Check out our latest analysis for MYT Netherlands Parent B.V

In the above chart we have measured MYT Netherlands Parent B.V's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

What Can We Tell From MYT Netherlands Parent B.V's ROCE Trend?

The trends we've noticed at MYT Netherlands Parent B.V are quite reassuring. Over the last four years, returns on capital employed have risen substantially to 12%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 79%. So we're very much inspired by what we're seeing at MYT Netherlands Parent B.V thanks to its ability to profitably reinvest capital.

The Key Takeaway

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what MYT Netherlands Parent B.V has. Astute investors may have an opportunity here because the stock has declined 62% in the last year. So researching this company further and determining whether or not these trends will continue seems justified.

Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation that compares the share price and estimated value.

While MYT Netherlands Parent B.V 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. 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.