1&1's (ETR:1U1) Returns On Capital Not Reflecting Well On The Business
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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. The formula for this calculation on 1&1 is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.07 = €546m ÷ (€8.4b - €680m) (Based on the trailing twelve months to March 2025).
Therefore, 1&1 has an ROCE of 7.0%. In absolute terms, that's a low return and it also under-performs the Wireless Telecom industry average of 9.0%.
Check out our latest analysis for 1&1
Above you can see how the current ROCE for 1&1 compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for 1&1 .
The Trend Of ROCE
On the surface, the trend of ROCE at 1&1 doesn't inspire confidence. To be more specific, ROCE has fallen from 13% over the last five years. Meanwhile, the business is utilizing more capital but this hasn't moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.
The Bottom Line On 1&1's ROCE
To conclude, we've found that 1&1 is reinvesting in the business, but returns have been falling. Since the stock has declined 16% over the last five years, investors may not be too optimistic on this trend improving either. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.
One more thing to note, we've identified 2 warning signs with 1&1 and understanding these should be part of your investment process.
While 1&1 isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.
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