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If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, the ROCE of Daimler Truck Holding (ETR:DTG) looks decent, right now, so lets see what the trend of returns can tell us.
Return On Capital Employed (ROCE): What Is It?
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. To calculate this metric for Daimler Truck Holding, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.10 = €5.0b ÷ (€73b - €25b) (Based on the trailing twelve months to September 2024).
Thus, Daimler Truck Holding has an ROCE of 10%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Machinery industry average of 8.9%.
Check out our latest analysis for Daimler Truck Holding
Above you can see how the current ROCE for Daimler Truck Holding 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 analyst report for Daimler Truck Holding .
The Trend Of ROCE
The trend of ROCE doesn't stand out much, but returns on a whole are decent. Over the past five years, ROCE has remained relatively flat at around 10% and the business has deployed 52% more capital into its operations. Since 10% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.
Our Take On Daimler Truck Holding's ROCE
To sum it up, Daimler Truck Holding has simply been reinvesting capital steadily, at those decent rates of return. And long term investors would be thrilled with the 105% return they've received over the last three years. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.
If you want to know some of the risks facing Daimler Truck Holding we've found 2 warning signs (1 shouldn't be ignored!) that you should be aware of before investing here.