Returns At MYT Netherlands Parent B.V (NYSE:MYTE) Are On The Way Up
If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So on that note, MYT Netherlands Parent B.V (NYSE:MYTE) looks quite promising in regards to its trends of return on capital.
Understanding Return On Capital Employed (ROCE)
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 MYT Netherlands Parent B.V, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.11 = €55m ÷ (€648m - €150m) (Based on the trailing twelve months to December 2022).
So, MYT Netherlands Parent B.V has an ROCE of 11%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Specialty Retail industry average of 13%.
View our latest analysis for MYT Netherlands Parent B.V
Above you can see how the current ROCE for MYT Netherlands Parent B.V compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for MYT Netherlands Parent B.V.
The Trend Of ROCE
MYT Netherlands Parent B.V is displaying some positive trends. The data shows that returns on capital have increased substantially over the last four years to 11%. The amount of capital employed has increased too, by 93%. So we're very much inspired by what we're seeing at MYT Netherlands Parent B.V thanks to its ability to profitably reinvest capital.
The Bottom Line On MYT Netherlands Parent B.V's ROCE
To sum it up, MYT Netherlands Parent B.V has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Astute investors may have an opportunity here because the stock has declined 60% in the last year. So researching this company further and determining whether or not these trends will continue seems justified.
While MYT Netherlands Parent B.V looks impressive, no company is worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether MYTE is currently trading for a fair price.
For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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