U.S. Markets open in 1 hr 54 mins

Don’t Buy Calida Holding AG (VTX:CALN) Until You Understand Its ROCE

Simply Wall St

Today we'll look at Calida Holding AG (VTX:CALN) and reflect on its potential as an investment. Specifically, we'll consider its Return On Capital Employed (ROCE), since that will give us an insight into how efficiently the business can generate profits from the capital it requires.

First of all, we'll work out how to calculate ROCE. Then we'll compare its ROCE to similar companies. And finally, we'll look at how its current liabilities are impacting its ROCE.

What is Return On Capital Employed (ROCE)?

ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. In general, businesses with a higher ROCE are usually better quality. Ultimately, it is a useful but imperfect metric. Author Edwin Whiting says to be careful when comparing the ROCE of different businesses, since 'No two businesses are exactly alike.

How Do You Calculate Return On Capital Employed?

The formula for calculating the return on capital employed is:

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

Or for Calida Holding:

0.089 = CHF22m ÷ (CHF371m - CHF120m) (Based on the trailing twelve months to June 2019.)

So, Calida Holding has an ROCE of 8.9%.

See our latest analysis for Calida Holding

Does Calida Holding Have A Good ROCE?

ROCE can be useful when making comparisons, such as between similar companies. Using our data, Calida Holding's ROCE appears to be around the 8.4% average of the Luxury industry. Aside from the industry comparison, Calida Holding's ROCE is mediocre in absolute terms, considering the risk of investing in stocks versus the safety of a bank account. It is possible that there are more rewarding investments out there.

We can see that, Calida Holding currently has an ROCE of 8.9%, less than the 13% it reported 3 years ago. Therefore we wonder if the company is facing new headwinds. The image below shows how Calida Holding's ROCE compares to its industry, and you can click it to see more detail on its past growth.

SWX:CALN Past Revenue and Net Income, December 4th 2019

Remember that this metric is backwards looking - it shows what has happened in the past, and does not accurately predict the future. ROCE can be misleading for companies in cyclical industries, with returns looking impressive during the boom times, but very weak during the busts. ROCE is, after all, simply a snap shot of a single year. What happens in the future is pretty important for investors, so we have prepared a free report on analyst forecasts for Calida Holding.

Calida Holding's Current Liabilities And Their Impact On Its ROCE

Current liabilities are short term bills and invoices that need to be paid in 12 months or less. The ROCE equation subtracts current liabilities from capital employed, so a company with a lot of current liabilities appears to have less capital employed, and a higher ROCE than otherwise. To check the impact of this, we calculate if a company has high current liabilities relative to its total assets.

Calida Holding has total assets of CHF371m and current liabilities of CHF120m. As a result, its current liabilities are equal to approximately 32% of its total assets. Calida Holding's ROCE is improved somewhat by its moderate amount of current liabilities.

What We Can Learn From Calida Holding's ROCE

Unfortunately, its ROCE is still uninspiring, and there are potentially more attractive prospects out there. But note: make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a P/E ratio below 20).

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.

  • Is Woodward Inc (WWD) A Good Stock To Buy?
    Business
    Insider Monkey

    Is Woodward Inc (WWD) A Good Stock To Buy?

    At Q3's end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from one quarter earlier. By comparison, 14 hedge funds held shares or bullish call options in WWD a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

  • Is Reliance Steel & Aluminum Co. (RS) A Good Stock To Buy ?
    Business
    Insider Monkey

    Is Reliance Steel & Aluminum Co. (RS) A Good Stock To Buy ?

    So let's take a glance at the smart money sentiment towards Reliance Steel & Aluminum Co. (NYSE:RS) and see how it was affected. Is Reliance Steel & Aluminum Co. (NYSE:RS) worth your attention right now? The smart money is becoming hopeful.

  • Boasting A 61% Return On Equity, Is eBay Inc. (NASDAQ:EBAY) A Top Quality Stock?
    Business
    Simply Wall St.

    Boasting A 61% Return On Equity, Is eBay Inc. (NASDAQ:EBAY) A Top Quality Stock?

    ROE looks at the amount a company earns relative to the money it has kept within the business. The 'return' is the amount earned after tax over the last twelve months. That means that the higher the ROE, the more profitable the company is.

  • Did Hedge Funds Drop The Ball On eHealth, Inc. (EHTH) ?
    Business
    Insider Monkey

    Did Hedge Funds Drop The Ball On eHealth, Inc. (EHTH) ?

    Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. EHTH was in 21 hedge funds' portfolios at the end of the third quarter of 2019. There were 26 hedge funds in our database with EHTH positions at the end of the previous quarter.

  • Hedge Funds Have Never Been This Bullish On Kilroy Realty Corp (KRC)
    Business
    Insider Monkey

    Hedge Funds Have Never Been This Bullish On Kilroy Realty Corp (KRC)

    With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was Kilroy Realty Corp (NYSE:KRC). Kilroy Realty Corp (NYSE:KRC) has experienced an increase in activity from the world's largest hedge funds in recent months.

  • Hedge Funds Have Never Been This Bullish On New York Community Bancorp, Inc. (NYCB)
    Business
    Insider Monkey

    Hedge Funds Have Never Been This Bullish On New York Community Bancorp, Inc. (NYCB)

    SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, though some funds increased their exposure dramatically at the end of Q3 and the beginning of Q4. In this article, we analyze what the smart money thinks of New York Community Bancorp, Inc. (NYSE:NYCB) and find out how it is affected by hedge funds' moves. NYCB was in 23 hedge funds' portfolios at the end of September.

  • 2 Children in North Carolina Charged With Involuntary Manslaughter
    U.S.
    Meredith Videos

    2 Children in North Carolina Charged With Involuntary Manslaughter

    Authorities in North Carolina say they've charged an 11-year-old boy and a 12-year-old girl with involuntary manslaughter after they got into a physical altercation with another child who was struck by a vehicle and killed

  • Business
    Reuters

    Constellation tightens grip on Canopy with CEO appointment

    Canadian pot producer Canopy Growth Corp on Monday named Chairman David Klein as it its chief executive officer, firming up the control of major shareholder Constellation Brands Inc . Klein, who is also Constellation's chief financial officer and was appointed Canopy chairman in October after the Corona beer maker racked up a big loss on its investment in the company, will take formal charge on Jan. 14. Constellation Brands has invested over $4 billion in Canopy, making it one of the first major alcohol producers looking to cash in on the proposed legalization of recreational weed in several countries.

  • The McMillan Shakespeare (ASX:MMS) Share Price Is Up 45% And Shareholders Are Holding On
    Business
    Simply Wall St.

    The McMillan Shakespeare (ASX:MMS) Share Price Is Up 45% And Shareholders Are Holding On

    McMillan Shakespeare Limited (ASX:MMS) shareholders have seen the share price descend 13% over the month. On the bright side the share price is up over the last half decade. Unfortunately its return of 45% is below the market return of 61%.

  • Do Hedge Funds Love Green Dot Corporation (GDOT)?
    Business
    Insider Monkey

    Do Hedge Funds Love Green Dot Corporation (GDOT)?

    The 700+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. Green Dot Corporation (NYSE:GDOT) was in 20 hedge funds' portfolios at the end of September. GDOT investors should be aware of an increase in activity from the world's largest hedge funds lately.

  • Is Oshkosh Corporation (OSK) A Good Stock To Buy?
    Business
    Insider Monkey

    Is Oshkosh Corporation (OSK) A Good Stock To Buy?

    Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 750 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Oshkosh Corporation (NYSE:OSK), so let's take a closer look at the sentiment that surrounds it in the current quarter.

  • Did Hedge Funds Drop The Ball On Clovis Oncology Inc (CLVS) ?
    Business
    Insider Monkey

    Did Hedge Funds Drop The Ball On Clovis Oncology Inc (CLVS) ?

    Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). Clovis Oncology Inc (NASDAQ:CLVS) has seen a decrease in support from the world's most elite money managers recently. CLVS was in 20 hedge funds' portfolios at the end of September.

  • Tullow CEO Quits Amid Poor Production
    Business
    Bloomberg

    Tullow CEO Quits Amid Poor Production

    Tullow Oil Plc's CEO and exploration director quit after a slew of operational setbacks, marking the exit of the old guard. Bloomberg's Will Kennedy reports on “Bloomberg Markets: European Open.

  • Best Buy kicks off '12 Days of Deals' Monday with themed sales through Dec. 20
    News
    USA TODAY

    Best Buy kicks off '12 Days of Deals' Monday with themed sales through Dec. 20

    Each day it will reveal new deals at the season's guaranteed lowest prices on tech brands including Apple, Samsung, Microsoft, Google and more. The offers will each be available only on that day and while supplies last both in-store and online. We know how hard it can be to find just the right gift at just the right price," Best Buy spokesman Keegan Shoutz told USA TODAY.

  • Dow futures retreat to start week after stock market puts in best session in months
    Business
    MarketWatch

    Dow futures retreat to start week after stock market puts in best session in months

    U.S. stock-index futures pointed to a lower start to the week, one session after a stellar jobs report ignited buying bullish sentiment on Wall Street, as investors brace for a wave of policy updates from global central banks and fresh developments in U.S. and China trade negotiations, with key tariff deadline looming Sunday. Futures for the Dow Jones Industrial Average retreated 40 points, or 0.1%, at 27,974. On Friday, the Dow (DJIA) rose 337.27 points, or 1.2%, at 28,015.06, while the S&P 500 (SPX) gained 28.48 points, or 0.9%, to 3,145.91, and Nasdaq Composite Index (COMP) advanced 85.83 points to 8,656.53, a gain of 1%.

  • Is Hubbell Incorporated (HUBB) A Good Stock To Buy ?
    Business
    Insider Monkey

    Is Hubbell Incorporated (HUBB) A Good Stock To Buy ?

    It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Conversely, hedge funds' top 20 large-cap stock picks generated a return of 37.4% during the same 11-month period, with the majority of these stock picks outperforming the broader market benchmark.

  • Does CVS Health Corporation's (NYSE:CVS) P/E Ratio Signal A Buying Opportunity?
    Business
    Simply Wall St.

    Does CVS Health Corporation's (NYSE:CVS) P/E Ratio Signal A Buying Opportunity?

    This article is written for those who want to get better at using price to earnings ratios (P/E ratios). We'll look at CVS Health Corporation's (NYSE:CVS) P/E ratio and reflect on what it tells us about the company's share price. Looking at earnings over the last twelve months, CVS Health has a P/E ratio of 21.20.

  • 3 Low Price-Book Stocks for Value Investors to Consider
    Business
    GuruFocus.com

    3 Low Price-Book Stocks for Value Investors to Consider

    If investors select stocks trading with a market capitalization of more than $10 billion (large caps) but less than 1.5 times book value, they will have higher chances of coming across value opportunities. Thus, the value investor may want to consider the following stocks, which have also received positive recommendation ratings from analysts on Wall Street, sustaining expectations they will perform better than most of their competitors. GuruFocus has detected 4 Warning Signs with BAC.

  • Europe Edges Toward 5G Restrictions After Blast of U.S. Lobbying
    Business
    Bloomberg

    Europe Edges Toward 5G Restrictions After Blast of U.S. Lobbying

    U.S. officials flooded Europe last week, and by the time they had departed, their efforts to persuade their allies to cut back in using Huawei Technologies Co. equipment appeared to finally be gaining traction. Europe has been caught between two major world powers, China and the U.S., over the question of whether to include Huawei in the roll-out of its future 5G mobile networks. Many European countries don't want to anger Beijing, a significant trading partner, while the U.S., an important security ally, has repeatedly said it may reassess intelligence sharing with countries that utilize Huawei in their 5G networks.

  • Here’s the hard-money call for why the boom in the economy and stock market will continue
    Business
    MarketWatch

    Here’s the hard-money call for why the boom in the economy and stock market will continue

    You might think the hard-money, recession-at-every-corner crowd would be predicting an imminent reversal in the stock market given the 20% gain for the Dow Jones Industrial Average this year. Dr. Thorsten Polleit, the chief economist at Swiss metals trader Degussa, explains why he thinks an economic boom will continue, with stock prices also strong. As per the charts below, current market interest rates in the U.S. have not reached rock bottom yet.

  • Here's Why I Think Equity LifeStyle Properties (NYSE:ELS) Might Deserve Your Attention Today
    Business
    Simply Wall St.

    Here's Why I Think Equity LifeStyle Properties (NYSE:ELS) Might Deserve Your Attention Today

    In contrast to all that, I prefer to spend time on companies like Equity LifeStyle Properties (NYSE:ELS), which has not only revenues, but also profits. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing. How Fast Is Equity LifeStyle Properties Growing?

  • Is Nokia Corporation (NOK) Going To Burn These Hedge Funds ?
    Business
    Insider Monkey

    Is Nokia Corporation (NOK) Going To Burn These Hedge Funds ?

    A duo of the best tools are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the elite hedge fund managers can outclass the S&P 500 by a healthy amount (see the details here). Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns.

  • Did Hedge Funds Drop The Ball On Teva Pharmaceutical Industries Limited (TEVA) ?
    Business
    Insider Monkey

    Did Hedge Funds Drop The Ball On Teva Pharmaceutical Industries Limited (TEVA) ?

    That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Teva Pharmaceutical Industries Limited (NYSE:TEVA). Is Teva Pharmaceutical Industries Limited (NYSE:TEVA) undervalued? Prominent investors are selling.

  • These are the 20 best-performing stocks of the past decade, and some of them will surprise you
    News
    MarketWatch

    These are the 20 best-performing stocks of the past decade, and some of them will surprise you

    a href="https://www.marketwatch.com/story/these-are-the-20-best-performing-stocks-of-the-past-decade-and-some-of-them-will-surprise-you-2019-12-09? siteid=yhoof2" (NFLX) Cable/Satellite TV 219% 3,767% 3 MarketAxess Holdings Inc.

  • Is GrubHub Inc (GRUB) Going To Burn These Hedge Funds ?
    Business
    Insider Monkey

    Is GrubHub Inc (GRUB) Going To Burn These Hedge Funds ?

    That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like GrubHub Inc (NYSE:GRUB). Is GrubHub Inc (NYSE:GRUB) a first-rate investment today? Prominent investors are taking a pessimistic view.