U.S. Markets closed

# Gesco AG (ETR:GSC1) Earns A Nice Return On Capital Employed

Today we'll look at Gesco AG (ETR:GSC1) and reflect on its potential as an investment. To be precise, we'll consider its Return On Capital Employed (ROCE), as that will inform our view of the quality of the business.

First up, we'll look at what ROCE is and how we calculate it. Next, we'll compare it to others in its industry. Finally, we'll look at how its current liabilities affect its ROCE.

### Understanding Return On Capital Employed (ROCE)

ROCE measures the amount of pre-tax profits a company can generate from the capital employed in its business. In general, businesses with a higher ROCE are usually better quality. Ultimately, it is a useful but imperfect metric. Renowned investment researcher Michael Mauboussin has suggested that a high ROCE can indicate that 'one dollar invested in the company generates value of more than one dollar'.

### So, How Do We Calculate ROCE?

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 Gesco:

0.11 = €42m ÷ (€534m - €162m) (Based on the trailing twelve months to September 2019.)

So, Gesco has an ROCE of 11%.

View our latest analysis for Gesco

### Is Gesco's ROCE Good?

ROCE can be useful when making comparisons, such as between similar companies. In our analysis, Gesco's ROCE is meaningfully higher than the 9.3% average in the Machinery industry. We would consider this a positive, as it suggests it is using capital more effectively than other similar companies. Regardless of where Gesco sits next to its industry, its ROCE in absolute terms appears satisfactory, and this company could be worth a closer look.

Our data shows that Gesco currently has an ROCE of 11%, compared to its ROCE of 8.7% 3 years ago. This makes us think the business might be improving. You can click on the image below to see (in greater detail) how Gesco's past growth compares to other companies.

When considering this metric, keep in mind that it is backwards looking, and not necessarily predictive. Companies in cyclical industries can be difficult to understand using ROCE, as returns typically look high during boom times, and low during busts. This is because ROCE only looks at one year, instead of considering returns across a whole cycle. Future performance is what matters, and you can see analyst predictions in our free report on analyst forecasts for the company.

### What Are Current Liabilities, And How Do They Affect Gesco's ROCE?

Current liabilities include invoices, such as supplier payments, short-term debt, or a tax bill, that need to be paid within 12 months. Due to the way ROCE is calculated, a high level of current liabilities makes a company look as though it has less capital employed, and thus can (sometimes unfairly) boost the ROCE. To counteract this, we check if a company has high current liabilities, relative to its total assets.

Gesco has total liabilities of €162m and total assets of €534m. Therefore its current liabilities are equivalent to approximately 30% of its total assets. With this level of current liabilities, Gesco's ROCE is boosted somewhat.

### The Bottom Line On Gesco's ROCE

With a decent ROCE, the company could be interesting, but remember that the level of current liabilities make the ROCE look better. Gesco shapes up well under this analysis, but it is far from the only business delivering excellent numbers . You might also want to check this free collection of companies delivering excellent earnings growth.

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.

• News
TheStreet.com

### Is the Stock Market Open on Martin Luther King Jr. Day?

Martin Luther King Jr. Day was first signed into law in 1983, and first officially observed as a holiday in 1986. Generally observed on the third Monday of January (close to or on King's actual birthday, January 15), MLK Day celebrates the life and legacy of one of America's most well-known and influential activists, who fought for racial and economic justice across the country. Martin Luther King Jr. Day, falling on January 20 this year, is a federal holiday, and not every worker in the country necessarily gets a day off of work for it (45% of employers gave workers the day off in 2019).

Barrons.com

### Is the Stock Market Open Today? Here Are the Hours for Martin Luther King Jr. Day.

Martin Luther King Jr. Day, the federal holiday that honors the civil rights movement figure who gave the famous “I Have a Dream” speech during the March on Washington for Jobs and Freedom in 1963. The holiday is always the third Monday of January, around the time of King's Jan. 15 birthday. Is the stock market open on MLK Day 2020?

Investopedia

### What's the Average 401(k) Balance by Age?

It can be hard to determine exactly how much you'll need for your own post-career days, but finding out how others are planning—or not—can offer a benchmark for setting goals and milestones. k) Plan Balances by Generation The good news is that Americans have been making an effort to save more. According to Fidelity Investments, the financial services firm that administers more than \$7.4 trillion in assets, the average 401(k) plan balance reached \$106,000 in the second quarter of 2019.

MarketWatch

### Will you ‘feel pretty stupid’ holding cash? One trader revisits Ray Dalio’s laughable call and warns of a similar drop

Almost exactly two years ago, investing legend Ray Dalio turned heads with one of the worst short-term market calls in recent memory. The Bridgewater Associates founder, in an interview at the World Economic Forum back in January 2018, told investors that they were going to “feel pretty stupid” if they were holding cash as stocks climbed toward record highs. So, how stupid did they feel?

• World
Reuters

### Tesla moves a step closer to opening first European factory with German property deal

U.S. electric car pioneer Tesla has agreed to buy a property on the outskirts of Berlin, bringing it a step closer to opening its first European factory, local authorities said on Sunday. The U.S. carmaker last November announced plans to build a giant factory in Gruenheide, in the eastern German state of Brandenburg, giving it the coveted "Made in Germany" label just as local rivals prepare to launch competing models. Tesla's board of directors approved a purchase agreement with the state of Brandenburg on Saturday to acquire a 300-hectare property, Brandenburg government spokesman Florian Engels said in a statement.

TipRanks

### 3 “Strong Buy” Biotech Stocks That Can Inject a Healthy Dose of Upside

To watch Selvaraju's track record, click here) The Street appears equally confident in IMMU's future potential; 4 Buy ratings add up to a Strong Buy consensus rating. With an average price target of \$28, the analysts believe Immunomedics can add 47% to its share price over the coming year. See Immunomedics stock analysis on TipRanks) Revance Therapeutics (RVNC) After a disappointing 2019, which saw Revance's share price drop by more than 18%, the neuromodulator-focused biotech has started 2020 with a bang; Revance stock is up by 38% year-to-date.

Quartz

### What interest rates dating back to 1311 tell us about today’s global economy

Interest rates sure are weird these days. Five central banks currently hold policy rates negative; several are dabbling with unconventional bond-buying. The one bank that tried to raise them, the Federal Reserve, found itself back cutting rates within a year.

MarketWatch

### From a U.S. stock surge to a bursting of China’s triple bubble, here are 10 possible shockers for 2020, according to Credit Suisse

Three weeks into the new year and there really haven't been that many surprises. Stocks keep reaching new records, and companies with what one could charitably say are elevated valuations, like plant-based food company Beyond Meat and car maker Tesla, are back in fashion. A brief flare-up of tensions in the Middle East seems to have been quickly relegated to history.

Oilprice.com

### Is This The End For Big Oil Dividends?

The largest publicly-traded oil companies in the world have been “living beyond their means” for years. Since 2010, the five largest oil majors have spent vastly more than they have generated when including shareholder payouts. ExxonMobil, BP, Chevron, Total, and Royal Dutch Shell have dished out a combined \$536 billion in dividends and share buybacks since 2010, a figure that far exceeds the \$329 billion in free cash flow over the same period, according to a new report from the Institute for Energy Economics and Financial Analysis (IEEFA).

• News
Meredith Videos

### Prince Harry Says He and Meghan Markle Hoped to Continue Royal Duties, but 'That Wasn’t Possible'

Prince Harry said Sunday that he felt “great sadness” but found “no other option” to cutting almost all of his and his wife Meghan's royal ties in the hopes of achieving a more peaceful life.

Bloomberg

### Peter Schiff Says He’s Lost His Bitcoin After Wallet Freeze-Out

Cryptocurrency skeptic Peter Schiff said he can't access his Bitcoin holdings after his digital wallet stopped accepting his password. I just lost all the Bitcoin I have ever owned,” Schiff, chief global strategist at Alliance Global Partners, said in a series of posts on his unverified Twitter account. My wallet got corrupted somehow and my password is no longer valid.

MarketWatch

### Value stocks are making a comeback, and here’s how to get in early

I believe that is unlikely to continue,” says Joel Greenblatt, the co-chief investment officer at Gotham Funds. was the worst year since 1999 for the strategy of buying cheap stocks and shorting expensive stocks (the top quintile for each), Greenblatt says. The last time this strategy experienced such extremely poor results, value put in three great years of performance, from 2000-2002.

Yahoo Finance

### 42% of people say this is why they aren't investing in the stock market

A recent JPMorgan Chase survey of about 1,200 investors and non-investors says it boils down to liquidity. The survey found that 42% of those who weren't investing yet were staying out of the stock market because they believed they didn't have enough money to invest. Kelli Keough, digital wealth management head at JPMorgan Chase, tells Yahoo Finance's “The First Trade” non-investors, those who are not in the stock market, say it's a struggle to save enough money to invest.

TipRanks

### 3 Monster Growth Stocks That Can Rip Higher in 2020

The impressive share gains are bolstered by a strong financial performance. MTZ last reported earnings at the beginning of November, and easily beat the EPS forecasts and the year-ago numbers. For revenue, MTZ reported \$2.02 billion, which missed the forecast but was still up 2% year-over-year.

• U.S.
Associated Press Videos

### Dramatic video, truck crashes offroad near trooper

Officials in the US state of Iowa are urging people to use caution and stay indoors if possible as blizzard conditions continued to wreak havoc in northern and central parts of the state on Saturday. Jan.

MarketWatch

### Man who made a killing during financial crisis says that, at some point, the stock market will slow down — but, till then, ‘I love riding a horse that’s running’

The U.S. stock market has enjoyed a nearly uninterrupted assault on records, highlighted by the Dow Jones Industrial Average (DJIA) closing at a milestone above 29,000 for the first time and the S&P 500 (SPX) achieving its own landmark close above the psychological round-number at 3,300, while investors in the Nasdaq Composite Index (COMP) may have their sights trained on 10,000.

Benzinga

### Barron's Picks And Pans: Apple, Boeing, Disney, Tesla And More

Barron's Roundtable panelist Rupal Bhansali's makes a case that Apple Inc. NYSE: AAPL) is disadvantaged on many fronts and trying to play catch-up in "Time to Short Apple, Says Rupal Bhansali. Yes, Short Apple."

TipRanks

### 3 Top-Notch “Strong Buy” Stocks Under \$3

If you're on a budget, yet in a risk-tolerant mood, it's worth taking a look at penny stocks – companies whose shares sell for less than \$5 apiece. Here you get a lot more for your money; For example, buying a single share of Amazon will set you back \$1,865, but if you wanted to spend the equivalent amount on a stock worth \$3, you could load up on 621 shares of company x. Is it worth it though?

TipRanks

### Tesla Hits All-Time High Before Being Downgraded: Where to Now?

So, where is Tesla headed? This week, analysts have been throwing the hat in, offering takes on the electric vehicle company from all possible angles, with the most recent rating being a downgrade. In this article, we'll take a look at three different ratings from the analysts.

Investopedia

### Avoid Paying Taxes on Social Security Income

With no inflation adjustment having been made to these benchmarks since 1983, they're now exceeded by most taxpayers who receive Social Security benefits and have other sources of income, too. A number of strategies, both before and after you retire, can limit the amount of tax you pay on Social Security benefits. Reducing your taxable income during the years in which you're drawing Social Security can have other benefits, too, such as lowering your Medicare premiums, which vary by income.

Barrons.com

### Big Buys of Intel, AT&T, and Facebook Stock by Norway’s Biggest Bank

Norway's largest financial-services group, DnB, made some big changes in its U.S.-traded stock investments in the last quarter of 2019. DnB more than tripled its investment in (INTC) stock (ticker: INTC) and cut its investment in rival (AMD) (AMD) nearly in half. The bank also bought substantially more (T) stock (T) and (FB) stock (FB).

Simply Wall St.

### Is There Now An Opportunity In Cisco Systems, Inc. (NASDAQ:CSCO)?

Today I will analyse the most recent data on Cisco Systems's outlook and valuation to see if the opportunity still exists. Is Cisco Systems still cheap? According to my valuation model, Cisco Systems seems to be fairly priced at around 3.7% below my intrinsic value, which means if you buy Cisco Systems today, you'd be paying a reasonable price for it.

MarketWatch

### ‘I’m 22 with \$70,000 in savings and investments, but I’m addicted to checking my brokerage accounts multiple times a day’

I do not want to live like that. I am addicted. I check my brokerage accounts multiple times a day and my mood is greatly affected by how the markets are doing.