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Gumtree Australia Markets' (ASX:GUM) Returns On Capital Are Heading Higher

Simply Wall St · 4d ago

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, 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 when we looked at Gumtree Australia Markets (ASX:GUM) and its trend of ROCE, we really liked what we saw.

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Understanding 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. Analysts use this formula to calculate it for Gumtree Australia Markets:

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

0.054 = AU$5.1m ÷ (AU$113m - AU$19m) (Based on the trailing twelve months to June 2025).

Therefore, Gumtree Australia Markets has an ROCE of 5.4%. Ultimately, that's a low return and it under-performs the Interactive Media and Services industry average of 9.7%.

Check out our latest analysis for Gumtree Australia Markets

roce
ASX:GUM Return on Capital Employed January 8th 2026

Historical performance is a great place to start when researching a stock so above you can see the gauge for Gumtree Australia Markets' 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 Gumtree Australia Markets.

What Does the ROCE Trend For Gumtree Australia Markets Tell Us?

The fact that Gumtree Australia Markets is now generating some pre-tax profits from its prior investments is very encouraging. The company was generating losses five years ago, but now it's earning 5.4% which is a sight for sore eyes. In addition to that, Gumtree Australia Markets is employing 173% more capital than previously which is expected of a company that's trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

In Conclusion...

To the delight of most shareholders, Gumtree Australia Markets has now broken into profitability. Given the stock has declined 52% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. With that in mind, we believe the promising trends warrant this stock for further investigation.

If you'd like to know more about Gumtree Australia Markets, we've spotted 4 warning signs, and 3 of them can't be ignored.

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