There's Been No Shortage Of Growth Recently For Constantinou Bros Hotels' (CSE:CBH) Returns On Capital
Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at Constantinou Bros Hotels (CSE:CBH) and its trend of ROCE, we really liked what we saw.
Return On Capital Employed (ROCE): What Is It?
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 Constantinou Bros Hotels is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.072 = €15m ÷ (€235m - €27m) (Based on the trailing twelve months to June 2025).
So, Constantinou Bros Hotels has an ROCE of 7.2%. In absolute terms, that's a low return but it's around the Hospitality industry average of 6.1%.
See our latest analysis for Constantinou Bros Hotels
Historical performance is a great place to start when researching a stock so above you can see the gauge for Constantinou Bros Hotels' ROCE against it's prior returns. If you'd like to look at how Constantinou Bros Hotels has performed in the past in other metrics, you can view this free graph of Constantinou Bros Hotels' past earnings, revenue and cash flow.
How Are Returns Trending?
We're delighted to see that Constantinou Bros Hotels is reaping rewards from its investments and has now broken into profitability. The company now earns 7.2% on its capital, because five years ago it was incurring losses. On top of that, what's interesting is that the amount of capital being employed has remained steady, so the business hasn't needed to put any additional money to work to generate these higher returns. With no noticeable increase in capital employed, it's worth knowing what the company plans on doing going forward in regards to reinvesting and growing the business. After all, a company can only become a long term multi-bagger if it continually reinvests in itself at high rates of return.
What We Can Learn From Constantinou Bros Hotels' ROCE
To bring it all together, Constantinou Bros Hotels has done well to increase the returns it's generating from its capital employed. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.
If you want to know some of the risks facing Constantinou Bros Hotels we've found 3 warning signs (1 is a bit unpleasant!) that you should be aware of before investing here.
While Constantinou Bros Hotels 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.