Fielmann Group's Returns On Capital: A Closer Look

As investors, we're always on the lookout for companies that can generate impressive returns on capital employed (ROCE). Fielmann Group (ETR:FIE), a leading optical retailer, has caught our attention, but there are some concerning trends in its ROCE that we need to explore. Let's dive into the data and analyze the potential implications for investors.

Fielmann Group's ROCE has been on a downward trajectory over the past five years, falling from a high of 23% to its current level of 15%. This decline is concerning, as it suggests that the company's ability to generate returns from its capital employed has been decreasing. However, it's essential to understand the context behind this trend before making any investment decisions.

One of the primary factors contributing to the decline in Fielmann Group's ROCE is the company's focus on growth and reinvestment. As Fielmann Group has increased its capital employed in the business, it has also invested in growth opportunities, which can temporarily reduce the ROCE. If these investments generate additional returns in the long run, the business and shareholders could benefit significantly.

Another factor to consider is the increase in Fielmann Group's current liabilities-to-total assets ratio, which has risen to 32%. This increase has also impacted the company's ROCE, as the denominator of the ROCE formula (Total Assets - Current Liabilities) has decreased. A higher current liabilities-to-total assets ratio can indicate that the company is relying more on short-term debt, which can increase its financial risk.

To mitigate this risk, Fielmann Group could consider implementing strategies such as improving working capital management, diversifying funding sources, strengthening the balance sheet, and monitoring and managing financial risks. By addressing these factors, Fielmann Group can work towards reducing its current liabilities-to-total assets ratio and improving its overall financial health, ultimately enhancing its ROCE and long-term sustainability.

In conclusion, while Fielmann Group's ROCE has been declining, it's essential to consider the context behind this trend and the potential opportunities for long-term growth. By addressing the factors contributing to the decline in ROCE and implementing appropriate strategies, Fielmann Group can work towards improving its financial health and generating higher returns for shareholders. As investors, we should continue to monitor the company's progress and make informed decisions based on the latest data and trends.

Remember, the key to successful investing is to stay informed, do thorough research, and maintain a long-term perspective. By doing so, we can identify potential opportunities and make the most of the market's ups and downs.