The Returns At MYT Netherlands Parent B.V (NYSE:MYTE) Aren't Growing

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. In light of that, when we looked at MYT Netherlands Parent B.V (NYSE:MYTE) and its ROCE trend, we weren't exactly thrilled.

What is 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. To calculate this metric for MYT Netherlands Parent B.V, this is the formula:

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

0.091 = €40m ÷ (€570m - €129m) (Based on the trailing twelve months to March 2022).

So, MYT Netherlands Parent B.V has an ROCE of 9.1%. Ultimately, that's a low return and it under-performs the Specialty Retail industry average of 18%.

See our latest analysis for MYT Netherlands Parent B.V

Above you can see how the current ROCE for MYT Netherlands Parent B.V compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

So How Is MYT Netherlands Parent B.V's ROCE Trending?

There are better returns on capital out there than what we're seeing at MYT Netherlands Parent B.V. Over the past three years, ROCE has remained relatively flat at around 9.1% and the business has deployed 70% more capital into its operations. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

The Key Takeaway

In conclusion, MYT Netherlands Parent B.V has been investing more capital into the business, but returns on that capital haven't increased. Since the stock has declined 70% over the last year, investors may not be too optimistic on this trend improving either. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

On a separate note, we've found 1 warning sign for MYT Netherlands Parent B.V you'll probably want to know about.

While MYT Netherlands Parent B.V 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.