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Von Roll Holding (VTX:ROL) Is Looking To Continue Growing Its Returns On Capital

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. So when we looked at Von Roll Holding (VTX:ROL) and its trend of ROCE, we really liked what we saw.

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. To calculate this metric for Von Roll Holding, this is the formula:

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

0.019 = CHF4.4m ÷ (CHF269m - CHF40m) (Based on the trailing twelve months to June 2022).

Therefore, Von Roll Holding has an ROCE of 1.9%. Ultimately, that's a low return and it under-performs the Electrical industry average of 17%.

See our latest analysis for Von Roll Holding

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

What The Trend Of ROCE Can Tell Us

While the ROCE is still rather low for Von Roll Holding, we're glad to see it heading in the right direction. We found that the returns on capital employed over the last five years have risen by 813%. The company is now earning CHF0.02 per dollar of capital employed. In regards to capital employed, Von Roll Holding appears to been achieving more with less, since the business is using 25% less capital to run its operation. A business that's shrinking its asset base like this isn't usually typical of a soon to be multi-bagger company.

Our Take On Von Roll Holding's ROCE

From what we've seen above, Von Roll Holding has managed to increase it's returns on capital all the while reducing it's capital base. Astute investors may have an opportunity here because the stock has declined 32% in the last five years. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

Like most companies, Von Roll Holding does come with some risks, and we've found 2 warning signs that you should be aware of.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.

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