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华尔街日报Returns Are Gaining Momentum At MedNation (FRA:EIF)
Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So on that note, MedNation (FRA:EIF) looks quite promising in regards to its trends of return on capital.
What Is Return On Capital Employed (ROCE)?
For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on MedNation is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.033 = €1.2m ÷ (€37m - €1.8m) (Based on the trailing twelve months to June 2025).
So, MedNation has an ROCE of 3.3%. In absolute terms, that's a low return and it also under-performs the Healthcare industry average of 6.3%.
Check out our latest analysis for MedNation
While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how MedNation has performed in the past in other metrics, you can view this free graph of MedNation's past earnings, revenue and cash flow.
What Can We Tell From MedNation's ROCE Trend?
It's great to see that MedNation has started to generate some pre-tax earnings from prior investments. Historically the company was generating losses but as we can see from the latest figures referenced above, they're now earning 3.3% on their capital employed. Additionally, the business is utilizing 44% less capital than it was five years ago, and taken at face value, that can mean the company needs less funds at work to get a return. MedNation could be selling under-performing assets since the ROCE is improving.
On a related note, the company's ratio of current liabilities to total assets has decreased to 5.0%, which basically reduces it's funding from the likes of short-term creditors or suppliers. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance.
The Bottom Line
In the end, MedNation has proven it's capital allocation skills are good with those higher returns from less amount of capital. Given the stock has declined 26% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. So researching this company further and determining whether or not these trends will continue seems justified.
Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 4 warning signs for MedNation (of which 2 are a bit unpleasant!) that you should know about.
While MedNation may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.
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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.