based fundamental – Angil http://angil.org/ Tue, 12 Apr 2022 21:00:41 +0000 en-US hourly 1 https://wordpress.org/?v=6.2.2 https://angil.org/wp-content/uploads/2021/06/icon-2021-06-29T195041.460-150x150.png based fundamental – Angil http://angil.org/ 32 32 Some investors may be concerned about Baikowski’s capital returns (EPA:ALBKK) https://angil.org/some-investors-may-be-concerned-about-baikowskis-capital-returns-epaalbkk/ Wed, 09 Mar 2022 05:59:52 +0000 https://angil.org/some-investors-may-be-concerned-about-baikowskis-capital-returns-epaalbkk/ Did you know that there are financial metrics that can provide clues to a potential multi-bagger? Typically, we will want to notice a growth trend to return to on capital employed (ROCE) and at the same time, a based capital employed. This shows us that it is a compounding machine, capable of continuously reinvesting its […]]]>

Did you know that there are financial metrics that can provide clues to a potential multi-bagger? Typically, we will want to notice a growth trend to return to on capital employed (ROCE) and at the same time, a based capital employed. This shows us that it is a compounding machine, capable of continuously reinvesting its profits back into the business and generating higher returns. In light of this, when we looked Baikowski (EPA:ALBKK) and its ROCE trend, we weren’t exactly thrilled.

Return on capital employed (ROCE): what is it?

If you’ve never worked with ROCE before, it measures the “yield” (pre-tax profit) a company generates from the capital used in its business. Analysts use this formula to calculate it for Baikowski:

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

0.094 = €4.6m ÷ (€67m – €18m) (Based on the last twelve months to June 2021).

Thereby, Baikowski has a ROCE of 9.4%. In absolute terms, this is a low yield, but it is far better than the chemical industry average of 7.8%.

See our latest analysis for Baikowski

ENXTPA: ALBKK Return on Capital Employed March 9, 2022

Although the past is not indicative of the future, it can be useful to know the historical performance of a company, which is why we have this graph above. If you want to see how Baikowski has performed in the past in other metrics, you can see this free chart of past profits, revenue and cash flow.

So what is Baikowski’s ROCE trend?

When we looked at the ROCE trend at Baikowski, we didn’t gain much confidence. Over the past four years, capital returns have declined to 9.4% from 13% four years ago. However, it looks like Baikowski could reinvest for long-term growth because while capital employed has increased, the company’s sales haven’t changed much over the past 12 months. It’s worth keeping an eye on the company’s earnings going forward to see if those investments end up contributing to the bottom line.

The essential

In summary, Baikowski is reinvesting funds into the business for growth, but unfortunately, it appears sales haven’t grown much yet. Considering the stock has gained an impressive 29% over the past three years, investors must be thinking there are better things to come. But if the trajectory of these underlying trends continues, we think the likelihood of it being a multi-bagger from here is not high.

One last note, you should inquire about the 3 warning signs we spotted some with Baikowski (including 1 which is a bit unpleasant).

For those who like to invest in solid companies, look at this free list of companies with strong balance sheets and high returns on equity.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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Watch out for Clas Ohlson (STO:CLAS B) and its returns on capital https://angil.org/watch-out-for-clas-ohlson-stoclas-b-and-its-returns-on-capital/ Wed, 23 Feb 2022 05:57:01 +0000 https://angil.org/watch-out-for-clas-ohlson-stoclas-b-and-its-returns-on-capital/ If we want to find a potential multi-bagger, there are often underlying trends that can provide clues. Typically, we will want to notice a growth trend to return to on capital employed (ROCE) and at the same time, a based capital employed. Basically, this means that a business has profitable initiatives that it can continue […]]]>

If we want to find a potential multi-bagger, there are often underlying trends that can provide clues. Typically, we will want to notice a growth trend to return to on capital employed (ROCE) and at the same time, a based capital employed. Basically, this means that a business has profitable initiatives that it can continue to reinvest in, which is a hallmark of a blending machine. However, after investigating Clas Ohlson (STO:CLAS B), we don’t think current trends fit the mold of a multi-bagger.

Understanding return on capital employed (ROCE)

If you’ve never worked with ROCE before, it measures the “yield” (pre-tax profit) a company generates from the capital used in its business. Analysts use this formula to calculate it for Clas Ohlson:

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

0.17 = 622 million kr ÷ (6.4 billion kr – 2.7 billion kr) (Based on the last twelve months to October 2021).

Thereby, Clas Ohlson has a ROCE of 17%. By itself, that’s a standard return, but it’s far better than the 12% generated by the specialty retail industry.

See our latest analysis for Clas Ohlson

OM:CLAS B Return on Capital Employed February 23, 2022

In the chart above, we measured Clas Ohlson’s past ROCE against his past performance, but the future is arguably more important. If you want to see what analysts are predicting for the future, you should check out our free report for Clas Ohlson.

What does Clas Ohlson’s ROCE trend tell us?

In terms of Clas Ohlson’s historic ROCE moves, the trend isn’t fantastic. About five years ago the return on capital was 28%, but since then it has fallen to 17%. Meanwhile, the company is using more capital, but that hasn’t changed much in terms of sales over the past 12 months, so that could reflect longer-term investments. It may take some time before the company begins to see a change in the income from these investments.

Furthermore, Clas Ohlson’s current liabilities are still quite high at 42% of total assets. This effectively means that suppliers (or short-term creditors) finance a large part of the business, so just be aware that this may introduce some elements of risk. Although this is not necessarily a bad thing, it can be beneficial if this ratio is lower.

The Key Takeaway

In summary, while we are somewhat encouraged by Clas Ohlson’s reinvestment in his own business, we are aware that returns are diminishing. And investors may recognize these trends since the stock has only returned 0.2% to shareholders in total over the past five years. So if you’re looking for a multi-bagger, we think you’d have better luck elsewhere.

One more thing we spotted 3 warning signs facing Clas Ohlson which might interest you.

Although Clas Ohlson isn’t currently generating the highest returns, we’ve compiled a list of companies that are currently generating over 25% return on equity. look at this free list here.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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Returns on Capital at Atlas Technical Consultants (NASDAQ:ATCX) Paint a Concerning Picture https://angil.org/returns-on-capital-at-atlas-technical-consultants-nasdaqatcx-paint-a-concerning-picture/ Sat, 19 Feb 2022 12:34:02 +0000 https://angil.org/returns-on-capital-at-atlas-technical-consultants-nasdaqatcx-paint-a-concerning-picture/ Finding a business that has the potential to grow significantly isn’t easy, but it is possible if we look at a few key financial metrics. Typically, we will want to notice a growth trend to return to on capital employed (ROCE) and at the same time, a based capital employed. Ultimately, this demonstrates that this […]]]>

Finding a business that has the potential to grow significantly isn’t easy, but it is possible if we look at a few key financial metrics. Typically, we will want to notice a growth trend to return to on capital employed (ROCE) and at the same time, a based capital employed. Ultimately, this demonstrates that this is a company that reinvests its earnings at increasing rates of return. However, after investigating Atlas Technical Consultants (NASDAQ:ATCX), we don’t think current trends fit the mold of a multi-bagger.

What is return on capital employed (ROCE)?

Just to clarify if you’re not sure, ROCE is a measure of the pre-tax income (as a percentage) that a business earns on the capital invested in its business. The formula for this calculation on Atlas Technical Consultants is:

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

0.045 = $16 million ÷ ($420 million – $66 million) (Based on the last twelve months to October 2021).

Thereby, Atlas Technical Consultants has a ROCE of 4.5%. Ultimately, that’s a poor performer, and it’s below the professional services industry average of 11%.

See our latest analysis for Atlas Technical Consultants

NasdaqGM:ATCX Return on Capital Employed February 19, 2022

In the chart above, we measured Atlas Technical Consultants’ past ROCE against its past performance, but the future is arguably more important. If you wish, you can view forecasts from analysts covering Atlas Technical Consultants here for free.

What does the ROCE trend tell us for Atlas Technical Consultants?

At first glance, the ROCE trend at Atlas Technical Consultants does not inspire confidence. Over the past three years, capital returns have declined to 4.5% from 6.1% three years ago. However, given that capital employed and revenue have both increased, it appears that the company is currently continuing to grow, following short-term returns. If these investments prove successful, it can bode very well for long-term stock performance.

The Key Takeaway

While returns have fallen for Atlas Technical Consultants lately, we are encouraged to see that sales are increasing and the company is reinvesting in its operations. These trends are beginning to be recognized by investors as the stock has delivered a 14% gain to shareholders who have held it over the past three years. Therefore, we recommend that you take a closer look at this stock to confirm if it has the makings of a good investment.

One last note, you should inquire about the 3 warning signs we spotted with Atlas Technical Consultants (including 1 essential).

While Atlas Tech Consultants don’t generate the highest return, check out this free list of companies that achieve high returns on equity with strong balance sheets.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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Returns on capital are remarkable for JB Hi-Fi (ASX: JBH) https://angil.org/returns-on-capital-are-remarkable-for-jb-hi-fi-asx-jbh/ Wed, 16 Feb 2022 01:29:08 +0000 https://angil.org/returns-on-capital-are-remarkable-for-jb-hi-fi-asx-jbh/ Did you know that there are financial metrics that can provide clues of a potential multi-bagger? First, we would like to identify a growth to return to on capital employed (ROCE) and at the same time, a based capital employed. Basically, this means that a business has profitable initiatives that it can continue to reinvest […]]]>

Did you know that there are financial metrics that can provide clues of a potential multi-bagger? First, we would like to identify a growth to return to on capital employed (ROCE) and at the same time, a based capital employed. Basically, this means that a business has profitable initiatives that it can continue to reinvest in, which is a hallmark of a blending machine. So when we looked at the ROCE trend of JB Hi-Fi (ASX:JBH) we really liked what we saw.

Return on capital employed (ROCE): what is it?

If you’ve never worked with ROCE before, it measures the “yield” (pre-tax profit) a company generates from the capital used in its business. To calculate this metric for JB Hi-Fi, here is the formula:

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

0.35 = AU$705 million ÷ (AU$3.8 billion – AU$1.8 billion) (Based on the last twelve months to December 2021).

So, JB Hi-Fi has a ROCE of 35%. In absolute terms, that’s an excellent return and even better than the specialty retail industry average of 20%.

See our latest review for JB Hi-Fi

ASX:JBH Return on Capital Employed February 16, 2022

In the chart above, we measured JB Hi-Fi’s past ROCE against its past performance, but the future is arguably more important. If you want to see what analysts are predicting for the future, you should check out our free report for JB Hi-Fi.

What does the ROCE trend tell us for JB Hi-Fi?

Investors would be thrilled with what’s happening at JB Hi-Fi. Data shows that capital returns have increased significantly over the past five years to 35%. The company is actually making more money per dollar of capital employed, and it’s worth noting that the amount of capital has also increased by 41%. So we’re very inspired by what we’re seeing at JB Hi-Fi with its ability to reinvest capital profitably.

On a separate but related note, it’s important to know that JB Hi-Fi has a current liabilities to total assets ratio of 48%, which we would consider quite high. This may entail certain risks, since the business is essentially dependent on its suppliers or other types of short-term creditors. Ideally, we would like this to decrease, as this would mean fewer risky bonds.

The essential

In summary, JB Hi-Fi has proven that it can reinvest in the business and generate higher returns on that capital employed, which is great. Given that the stock has returned 153% to shareholders over the past five years, it seems investors recognize these changes. That being said, we still think the promising fundamentals mean the company merits further due diligence.

Since virtually every business faces risks, it’s worth knowing about them, and we’ve spotted 2 warning signs for JB Hi-Fi (1 of which is a little worrying!) that you should know about.

If you want to find more stocks that have generated high returns, check out this free list of stocks with strong balance sheets that also generate high returns on equity.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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Ameren (NYSE:AEE) may have issues allocating capital https://angil.org/ameren-nyseaee-may-have-issues-allocating-capital/ Mon, 14 Feb 2022 10:20:57 +0000 https://angil.org/ameren-nyseaee-may-have-issues-allocating-capital/ If we want to find a potential multi-bagger, there are often underlying trends that can provide clues. Ideally, a business will show two trends; first growth to return to on capital employed (ROCE) and on the other hand, growth quantity capital employed. Simply put, these types of businesses are slot machines, meaning they continually reinvest […]]]>

If we want to find a potential multi-bagger, there are often underlying trends that can provide clues. Ideally, a business will show two trends; first growth to return to on capital employed (ROCE) and on the other hand, growth quantity capital employed. Simply put, these types of businesses are slot machines, meaning they continually reinvest their profits at ever-higher rates of return. However, after briefly looking at the numbers, we don’t think American (NYSE: AEE) has the makings of a multi-bagger in the future, but let’s see why it may be.

Return on capital employed (ROCE): what is it?

For those who don’t know what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital used in its business. To calculate this metric for Ameren, here is the formula:

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

0.046 = $1.5 billion ÷ ($35 billion – $2.4 billion) (Based on the last twelve months to September 2021).

So, Ameren posted a ROCE of 4.6%. Even though it’s in line with the industry average of 4.6%, it’s still a poor performer on its own.

See our latest analysis for Ameren

NYSE: AEE Return on Capital Employed February 14, 2022

In the chart above, we measured Ameren’s past ROCE against its past performance, but the future is arguably more important. If you want, you can check out analyst forecasts covering Ameren here for free.

So, what is Ameren’s ROCE trend?

In terms of Ameren’s historic ROCE moves, the trend isn’t fantastic. Over the past five years, capital returns have declined to 4.6% from 6.3% five years ago. Meanwhile, the company is using more capital, but that hasn’t changed much in terms of sales over the past 12 months, so that could reflect longer-term investments. It’s worth keeping an eye on the company’s earnings going forward to see if those investments end up contributing to the bottom line.

Our take on Ameren’s ROCE

In summary, while we are somewhat encouraged by Ameren’s reinvestment in its own business, we are aware that returns are diminishing. Considering the stock has gained an impressive 84% over the past five years, investors must be thinking there are better things to come. However, unless these underlying trends turn more positive, we wouldn’t be too hopeful.

Ameren does come with some risks though, we have found 3 warning signs in our investment analysis, and 1 of them makes us a little uncomfortable…

Although Ameren isn’t currently making the highest returns, we’ve compiled a list of companies that are currently generating more than 25% return on equity. look at this free list here.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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Capital returns at Press Metal Aluminum Holdings Berhad (KLSE:PMETAL) have dampened https://angil.org/capital-returns-at-press-metal-aluminum-holdings-berhad-klsepmetal-have-dampened/ Sun, 06 Feb 2022 00:53:07 +0000 https://angil.org/capital-returns-at-press-metal-aluminum-holdings-berhad-klsepmetal-have-dampened/ What trends should we look for if we want to identify stocks that can multiply in value over the long term? Among other things, we will want to see two things; first, growth to return to on capital employed (ROCE) and on the other hand, an expansion of the quantity capital employed. Ultimately, this demonstrates […]]]>

What trends should we look for if we want to identify stocks that can multiply in value over the long term? Among other things, we will want to see two things; first, growth to return to on capital employed (ROCE) and on the other hand, an expansion of the quantity capital employed. Ultimately, this demonstrates that this is a company that reinvests its earnings at increasing rates of return. Therefore, when we briefly examined Press Metal Aluminum Holdings Berhad’s (KLSE:PMETAL) ROCE trend, we were pretty happy with what we saw.

Return on capital employed (ROCE): what is it?

For those who don’t know what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital used in its business. The formula for this calculation on Press Metal Aluminum Holdings Berhad is:

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

0.16 = RM1.4b ÷ (RM13b – RM4.3b) (Based on the last twelve months to September 2021).

Thereby, Press Metal Aluminum Holdings Berhad has a ROCE of 16%. In itself, this is a standard return, but it is much better than the 12% generated by the metals and mining industry.

Check out our latest analysis for Press Metal Aluminum Holdings Berhad

KLSE:PMETAL Return on Capital Employed February 6, 2022

In the chart above, we measured Press Metal Aluminum Holdings Berhad’s past ROCE against its past performance, but the future is arguably more important. If you want, you can check analyst forecasts covering Press Metal Aluminum Holdings Berhad here for free.

The ROCE trend

Although capital returns are good, they haven’t changed much. Over the past five years, ROCE has remained relatively stable at around 16% and the company has deployed 89% more capital into its operations. Since 16% is a moderate ROCE, it’s good to see that a company can continue to reinvest at these decent rates of return. Stable returns in this stage can be unexciting, but if they can be sustained over the long term, they often offer handsome rewards to shareholders.

Our view on Berhad’s Press Metal Aluminum Holdings ROCE

The main thing to remember is that Press Metal Aluminum Holdings Berhad has proven its ability to continually reinvest at respectable rates of return. And the stock has done incredibly well with a 488% return over the past five years, so long-term investors are no doubt pleased with this result. So while the positive underlying trends can be explained by investors, we still think this stock deserves further investigation.

Press Metal Aluminum Holdings Berhad poses some risks, however, and we have spotted 1 warning sign for Press Metal Aluminum Holdings Berhad that might interest you.

Although Press Metal Aluminum Holdings Berhad does not currently generate the highest returns, we have compiled a list of companies that currently generate more than 25% return on equity. look at this free list here.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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Investors should not overlook favorable capital returns at Scotts Miracle-Gro (NYSE:SMG) https://angil.org/investors-should-not-overlook-favorable-capital-returns-at-scotts-miracle-gro-nysesmg/ Sun, 30 Jan 2022 14:53:50 +0000 https://angil.org/investors-should-not-overlook-favorable-capital-returns-at-scotts-miracle-gro-nysesmg/ Did you know that there are financial metrics that can provide clues to a potential multi-bagger? Typically, we will want to notice a growth trend to return to on capital employed (ROCE) and at the same time, a based capital employed. Simply put, these types of businesses are slot machines, meaning they continually reinvest their […]]]>

Did you know that there are financial metrics that can provide clues to a potential multi-bagger? Typically, we will want to notice a growth trend to return to on capital employed (ROCE) and at the same time, a based capital employed. Simply put, these types of businesses are slot machines, meaning they continually reinvest their profits at ever-higher rates of return. Therefore, when we looked at ROCE trends at Scotts Miracle-Gro (NYSE: SMG), we liked what we saw.

What is return on capital employed (ROCE)?

For those unaware, ROCE is a measure of a company’s annual pre-tax profit (yield), relative to the capital employed in the business. The formula for this calculation on Scotts Miracle-Gro is:

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

0.20 = $750 million ÷ ($4.8 billion – $1.1 billion) (Based on the last twelve months to September 2021).

So, Scotts Miracle-Gro has a 20% ROI. In absolute terms, this is an excellent return and is even better than the chemical industry average of 11%.

See our latest analysis for Scotts Miracle-Gro

NYSE: SMG Return on Capital Employed January 30, 2022

Above, you can see how Scotts Miracle-Gro’s current ROCE compares to its past returns on capital, but there’s little you can say about the past. If you want to see what analysts predict for the future, you should check out our free report for Scotts Miracle-Gro.

What the ROCE trend can tell us

In terms of Scotts Miracle-Gro’s ROCE history, that’s pretty impressive. The company has consistently gained 20% over the past five years and the capital employed within the company has increased by 78% over this period. Now considering that the ROCE is an attractive 20%, this combination is actually quite attractive because it means the company can consistently put money to work and generate those high returns. If Scotts Miracle-Gro can continue like this, we would be very optimistic about its future.

Scotts Miracle-Gro ROCE Basics

In summary, we are pleased to see that Scotts Miracle-Gro has compounded returns by reinvesting at consistently high rates of return, as these are common characteristics of a multi-bagger. And since the stock has risen sharply over the past five years, it looks like the market might be expecting that trend to continue. So while the stock may be more “expensive” than it used to be, we believe the strong fundamentals warrant this stock for further research.

If you want to further research Scotts Miracle-Gro, you may be interested in learning more about the 1 warning sign that our analysis found.

If you want to find more stocks that have generated high returns, check out this free list of stocks with strong balance sheets that also generate high returns on equity.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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We like these underlying capital return trends at Zehnder Group (VTX: ZEHN) https://angil.org/we-like-these-underlying-capital-return-trends-at-zehnder-group-vtx-zehn/ Thu, 27 Jan 2022 05:52:36 +0000 https://angil.org/we-like-these-underlying-capital-return-trends-at-zehnder-group-vtx-zehn/ If we want to find a stock that could multiply over the long term, what are the underlying trends we should be looking for? First, we would like to identify a growth to return to on capital employed (ROCE) and at the same time, a based capital employed. If you see this, it usually means […]]]>

If we want to find a stock that could multiply over the long term, what are the underlying trends we should be looking for? First, we would like to identify a growth to return to on capital employed (ROCE) and at the same time, a based capital employed. If you see this, it usually means it’s a company with a great business model and lots of profitable reinvestment opportunities. So on that note, Zehnder Group (VTX:ZEHN) looks quite promising when it comes to its capital return trends.

Understanding return on capital employed (ROCE)

For those who don’t know what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital used in its business. Analysts use this formula to calculate it for Zehnder Group:

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

0.19 = €72m ÷ (€532m – €155m) (Based on the last twelve months to June 2021).

So, Zehnder Group has a ROCE of 19%. In absolute terms, that’s a pretty normal return, and it’s a bit close to the building industry average of 23%.

Discover our latest analysis for Zehnder Group

SWX:ZEHN Return on Capital Employed January 27, 2022

Above you can see how Zehnder Group’s current ROCE compares to its past returns on capital, but there is little you can say about the past. If you’re interested, you can check out analyst forecasts in our free analyst forecast report for the company.

What is the return trend?

Zehnder Group is promising given that its ROCE is trending up and to the right. Looking at the data, we can see that even though the capital employed in the business has remained relatively stable, the ROCE generated has increased by 173% over the past five years. Basically, the business generates higher returns from the same amount of capital and this is evidence that there are improvements in the efficiency of the business. It’s worth digging into this though, because while it’s great that the business is more efficient, it could also mean that in the future, areas to invest in internally for organic growth are lacking.

What we can learn from Zehnder Group’s ROCE

As noted above, Zehnder Group appears to be becoming more efficient at generating returns as capital employed has remained stable but earnings (before interest and taxes) are up. And since the stock has performed exceptionally well over the past five years, these trends are taken into account by investors. Therefore, we think it would be worth checking whether these trends will continue.

Before drawing any conclusions, we need to know what value we get for the current stock price. This is where you can view our FREE Intrinsic Value Estimate which compares the stock price and the estimated value.

Although Zehnder Group does not currently achieve the highest returns, we have compiled a list of companies that currently generate more than 25% return on equity. look at this free list here.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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Here’s what concerns RPS Group’s return on capital (LON:RPS) https://angil.org/heres-what-concerns-rps-groups-return-on-capital-lonrps/ Tue, 25 Jan 2022 14:04:40 +0000 https://angil.org/heres-what-concerns-rps-groups-return-on-capital-lonrps/ If you’re looking at a mature business that’s past the growth phase, what are some of the underlying trends that emerge? When we see a decline to return to on capital employed (ROCE) in connection with a decrease based capital employed, this is often how a mature company shows signs of aging. This combination can […]]]>

If you’re looking at a mature business that’s past the growth phase, what are some of the underlying trends that emerge? When we see a decline to return to on capital employed (ROCE) in connection with a decrease based capital employed, this is often how a mature company shows signs of aging. This combination can tell you that the company is not only investing less, but earning less on what it invests. On that note, looking at RPS Group (LON:RPS), we weren’t too optimistic about how things were going.

What is return on capital employed (ROCE)?

If you’ve never worked with ROCE before, it measures the “yield” (pre-tax profit) a company generates from the capital used in its business. The formula for this calculation on RPS Group is:

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

0.043 = £17m ÷ (£585m – £191m) (Based on the last twelve months to June 2021).

Thereby, RPS Group posted a ROCE of 4.3%. In absolute terms, this is a weak performance and it is also below the commercial services industry average of 11%.

See our latest analysis for RPS Group

LSE: RPS Return on Capital Employed January 25, 2022

In the chart above, we measured RPS Group’s past ROCE against its past performance, but the future is arguably more important. If you wish, you can view forecasts from analysts covering RPS Group here for free.

What does the ROCE trend tell us for RPS Group?

We are not inspired by the trend, given that the ROCE has decreased by 29% in the last five years and that RPS Group applies -25% less capital in the company, even after the capital increase that they conducted (before their latest published figures).

In this regard, we noticed that the ratio of current liabilities to total assets rose to 33%, which impacted ROCE. If current liabilities hadn’t risen as much as they did, ROCE might actually be even lower. Although the ratio is not too high currently, it is worth keeping an eye on it because if it becomes particularly high, then the company could face new elements of risk.

The Key Takeaway

In summary, it is unfortunate that the RPS group is reducing its capital base and also generating lower returns. Investors did not like these developments, as the stock fell 45% from five years ago. Unless there is a shift to a more positive trajectory in these measures, we would look elsewhere.

Finally we found 1 warning sign for the RPS group which we think you should be aware of.

Although RPS Group doesn’t get the highest return, check out this free list of companies that achieve high returns on equity with strong balance sheets.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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Luoyang Glass (HKG: 1108) experiences growth in return on capital https://angil.org/luoyang-glass-hkg-1108-experiences-growth-in-return-on-capital/ Tue, 11 Jan 2022 22:17:10 +0000 https://angil.org/luoyang-glass-hkg-1108-experiences-growth-in-return-on-capital/ What are the first trends to look for to identify a title that could multiply over the long term? In a perfect world, we would like a business to invest more capital in their business, and ideally the returns from that capital increase as well. If you see this, it usually means it’s a company […]]]>

What are the first trends to look for to identify a title that could multiply over the long term? In a perfect world, we would like a business to invest more capital in their business, and ideally the returns from that capital increase as well. If you see this, it usually means it’s a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, we’ve noticed some promising trends at Luoyang glass (HKG: 1108) so let’s look a little deeper.

Return on capital employed (ROCE): what is it?

If you’ve never worked with ROCE before, it measures the “return” (profit before tax) that a business generates on capital employed in its business. To calculate this metric for Luoyang glass, here is the formula:

Return on capital employed = Profit before interest and taxes (EBIT) ÷ (Total assets – Current liabilities)

0.16 = CN ¥ 870m ÷ (CN ¥ 9.8b – CN ¥ 4.3b) (Based on the last twelve months up to September 2021).

Thereby, Luoyang Glass has a ROCE of 16%. By itself, this is a normal return on capital and is in line with industry average returns of 16%.

See our latest review for Luoyang Glass

SEHK: 1108 Return on capital employed on January 11, 2022

Above you can see how Luoyang Glass’ current ROCE compares to its previous returns on capital, but there isn’t much you can say about the past. If you’d like to see what analysts are forecasting for the future, you should check out our free report for Luoyang Glass.

What can we say about the ROCE trend of Luoyang Glass?

The fact that Luoyang Glass is now generating pre-tax profits on its previous investments is very encouraging. About five years ago the company was making losses, but things have changed as it now earns 16% on its equity. In addition to this, Luoyang Glass employs 1,096% more capital than before, which is expected of a company trying to achieve profitability. This may tell us that the company has many reinvestment opportunities capable of generating higher returns.

One more thing to note, Luoyang Glass reduced current liabilities to 44% of total assets during this period, effectively reducing the amount of financing from suppliers or short-term creditors. So this improvement in ROCE came from the underlying economics of the business, which is great to see. Nonetheless, there are some potential risks the business bears with such high short-term liabilities, so keep that in mind.

The bottom line

In summary, it’s great to see that Luoyang Glass has managed to become profitable and continues to reinvest in his business. And as the stock has performed exceptionally well over the past five years, these trends are being taken into account by investors. So, given that the stock has proven to have some promising trends, it’s worth doing more research on the company to see if these trends are likely to continue.

On a final note, we found 3 warning signs for Luoyang glass (1 is significant) you must be aware.

Although Luoyang Glass does not currently generate the highest returns, we have compiled a list of companies that currently generate over 25% return on equity. Check it out free list here.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only 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 into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.

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