If you're looking for a multi-bagger, there's a few things to keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. That's why when we briefly looked at Eckert & Ziegler Strahlen- und Medizintechnik's (ETR:EUZ) ROCE trend, we were pretty happy with what we saw.

Return On Capital Employed (ROCE): What Is It?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Eckert & Ziegler Strahlen- und Medizintechnik, this is the formula:

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

0.11 = €39m ÷ (€443m - €80m) (Based on the trailing twelve months to September 2023).

So, Eckert & Ziegler Strahlen- und Medizintechnik has an ROCE of 11%. In absolute terms, that's a satisfactory return, but compared to the Medical Equipment industry average of 6.5% it's much better.

View our latest analysis for Eckert & Ziegler Strahlen- und Medizintechnik

Above you can see how the current ROCE for Eckert & Ziegler Strahlen- und Medizintechnik compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Eckert & Ziegler Strahlen- und Medizintechnik here for free.

What The Trend Of ROCE Can Tell Us

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has consistently earned 11% for the last five years, and the capital employed within the business has risen 91% in that time. 11% is a pretty standard return, and it provides some comfort knowing that Eckert & Ziegler Strahlen- und Medizintechnik has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

Our Take On Eckert & Ziegler Strahlen- und Medizintechnik's ROCE

The main thing to remember is that Eckert & Ziegler Strahlen- und Medizintechnik has proven its ability to continually reinvest at respectable rates of return. And the stock has done incredibly well with a 204% return over the last five years, so long term investors are no doubt ecstatic with that result. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

While Eckert & Ziegler Strahlen- und Medizintechnik doesn't shine too bright in this respect, it's still worth seeing if the company is trading at attractive prices. You can find that out with our FREE intrinsic value estimation on our platform.

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.

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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.