Deutsche Post (ETR:DPW) shareholders will want ROCE trajectory to continue

There are a few key trends to look out for if we want to identify the next multi-bagger. Among other things, we will want to see two things; first, growth to return to on capital employed (ROCE) and on the other hand, an expansion of the amount capital employed. Ultimately, this demonstrates that this is a company that reinvests its earnings at increasing rates of return. So on that note, deutsche post (ETR:DPW) looks quite promising when it comes to its capital return trends.

Return on capital employed (ROCE): what is it?

Just to clarify if you’re not sure, ROCE is a measure of the pre-tax income (as a percentage) that a business earns on the capital invested in its business. The formula for this calculation on Deutsche Post is:

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

0.18 = $7.3 billion ÷ ($60 billion – $20 billion) (Based on the last twelve months to September 2021).

So, Deutsche Post has a ROCE of 18%. In itself, this is a standard return, but it is much better than the 15% generated by the logistics industry.

Discover our latest analysis for Deutsche Post

XTRA:DPW Return on Capital Employed March 8, 2022

Above, you can see how Deutsche Post’s current ROCE compares to its past returns on capital, but you can’t say anything about the past. If you want to see what analysts are predicting for the future, you should check out our free report for Deutsche Post.

So what is Deutsche Post’s ROCE trending?

Investors would be happy with what is happening at Deutsche Post. Data shows that capital returns have increased significantly over the past five years to 18%. Basically, the business earns more per dollar of invested capital and on top of that, 81% more capital is also utilized now. This may indicate that there are many opportunities to invest capital internally and at ever-increasing rates, a common combination among multi-baggers.

In conclusion…

Overall, it is great to see that Deutsche Post is reaping the rewards of past investments and increasing its capital base. Given that the stock has returned a solid 49% to shareholders over the past five years, it’s fair to say that investors are starting to recognize these changes. Therefore, we think it would be worth checking whether these trends will continue.

Like most businesses, Deutsche Post carries certain risks, and we have found 2 warning signs which you should be aware of.

Although Deutsche Post isn’t currently making the highest returns, we’ve compiled a list of companies that are currently generating more than 25% return on equity. look at this free list here.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

Comments are closed.