The Return Trends At Leptos Calypso Hotels (CSE:LCH) Look Promising

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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Leptos Calypso Hotels' (CSE:LCH) returns on capital, so let's have a look.

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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. Analysts use this formula to calculate it for Leptos Calypso Hotels:

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

0.043 = €5.9m ÷ (€160m - €22m) (Based on the trailing twelve months to June 2025).

Therefore, Leptos Calypso Hotels has an ROCE of 4.3%. In absolute terms, that's a low return and it also under-performs the Hospitality industry average of 6.1%.

See our latest analysis for Leptos Calypso Hotels

Historical performance is a great place to start when researching a stock so above you can see the gauge for Leptos Calypso Hotels' ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Leptos Calypso Hotels.

What Does the ROCE Trend For Leptos Calypso Hotels Tell Us?

While there are companies with higher returns on capital out there, we still find the trend at Leptos Calypso Hotels promising. The figures show that over the last five years, ROCE has grown 2,064% whilst employing roughly the same amount of capital. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

In Conclusion...

As discussed above, Leptos Calypso Hotels appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. And a remarkable 262% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

One more thing: We've identified 3 warning signs with Leptos Calypso Hotels (at least 2 which don't sit too well with us) , and understanding these would certainly be useful.

While Leptos Calypso Hotels isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.