If you aren’t sure where to start when looking for the next multi-bagger, there are a few key trends you should watch out 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. Basically, it means that a business has profitable initiatives that it can keep reinvesting in, which is a hallmark of a dialing machine. With that in mind, we’ve noticed some promising trends at Anglo-Eastern plantations (LON: AEP) so let’s look a little deeper.
What is Return on Employee Capital (ROCE)?
For those who don’t know, ROCE is a measure of a company’s annual pre-tax profit (its return), relative to the capital employed in the company. The formula for this calculation on Anglo-Eastern plantations is:
Return on capital employed = Profit before interest and taxes (EBIT) ÷ (Total assets – Current liabilities)
0.15 = US $ 86 million ÷ (US $ 628 million – US $ 41 million) (Based on the last twelve months up to June 2021).
So, Anglo-Eastern Plantations has a ROCE of 15%. On its own, that’s a standard return, but it’s far better than the 11% generated by the food industry.
Although the past is not representative 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 look at Anglo-Eastern Plantations’ performance in the past in other metrics, you can check out this free past income, income and cash flow graph.
What is the trend for returns?
Anglo-Eastern Plantations is showing positive trends. Data shows that returns on capital have increased dramatically over the past five years to reach 15%. The company actually makes more money per dollar of capital used, and it should be noted that the amount of capital has also increased by 27%. So we’re very inspired by what we’re seeing at Anglo-Eastern Plantations through its ability to reinvest capital profitably.
A business that increases its returns on capital and can constantly reinvest in itself is a highly desirable trait, and that’s what Anglo-Eastern Plantations has. Investors may not yet be impressed with the favorable underlying trends, as over the past five years, the stock has only returned 8.2% to shareholders. With that in mind, we would dig deeper into this stock in case there are more traits that could cause it to multiply in the long term.
While Anglo-Eastern Plantations looks impressive, no business is worth an endless price. the intrinsic value infographic in our free research report helps visualize if AEP is currently trading at a fair price.
Although Anglo-Eastern Plantations doesn’t get the highest yield, check out this free list of companies that generate high returns on equity with strong balance sheets.
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