Yahoo Finance Investors Met With Slowing Returns on Capital At Progress-Werk Oberkirch (ETR:PWO)
What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Although, when we looked at Progress-Werk Oberkirch (ETR:PWO), it didn't seem to tick all of these boxes.
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. Analysts use this formula to calculate it for Progress-Werk Oberkirch:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.077 = €20m ÷ (€407m - €153m) (Based on the trailing twelve months to June 2022).
Thus, Progress-Werk Oberkirch has an ROCE of 7.7%. In absolute terms, that's a low return and it also under-performs the Auto Components industry average of 9.6%.
View our latest analysis for Progress-Werk Oberkirch
In the above chart we have measured Progress-Werk Oberkirch's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Progress-Werk Oberkirch.
What The Trend Of ROCE Can Tell Us
Things have been pretty stable at Progress-Werk Oberkirch, with its capital employed and returns on that capital staying somewhat the same for the last five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So don't be surprised if Progress-Werk Oberkirch doesn't end up being a multi-bagger in a few years time.
In Conclusion...
We can conclude that in regards to Progress-Werk Oberkirch's returns on capital employed and the trends, there isn't much change to report on. And investors appear hesitant that the trends will pick up because the stock has fallen 34% in the last five years. 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.
One more thing: We've identified 3 warning signs with Progress-Werk Oberkirch (at least 1 which makes us a bit uncomfortable) , and understanding them would certainly be useful.
While Progress-Werk Oberkirch 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.
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