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Returns On Capital At Fraport (ETR:FRA) Paint A Concerning Picture

Simply Wall St · 06/30 10:22

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding 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. Having said that, from a first glance at Fraport (ETR:FRA) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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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 Fraport is:

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

0.04 = €702m ÷ (€20b - €2.3b) (Based on the trailing twelve months to March 2025).

So, Fraport has an ROCE of 4.0%. In absolute terms, that's a low return and it also under-performs the Infrastructure industry average of 10%.

See our latest analysis for Fraport

roce
XTRA:FRA Return on Capital Employed June 30th 2025

Above you can see how the current ROCE for Fraport compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Fraport for free.

How Are Returns Trending?

When we looked at the ROCE trend at Fraport, we didn't gain much confidence. Over the last five years, returns on capital have decreased to 4.0% from 5.3% five years ago. However it looks like Fraport might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It may take some time before the company starts to see any change in earnings from these investments.

The Bottom Line

To conclude, we've found that Fraport is reinvesting in the business, but returns have been falling. Although the market must be expecting these trends to improve because the stock has gained 55% over the last five years. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.

Like most companies, Fraport does come with some risks, and we've found 1 warning sign that you should be aware of.

While Fraport 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.