Growth has not been lacking in recent times for returns on capital of Anglo-Eastern plantations (LON: AEP)

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.

Consult our latest analysis for Anglo-Eastern plantations

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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.

In conclusion…

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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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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