The Returns On Capital At Elvalhalcor Hellenic Copper and Aluminium Industry (ATH:ELHA) Don't Inspire Confidence

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. In light of that, when we looked at Elvalhalcor Hellenic Copper and Aluminium Industry (ATH:ELHA) and its ROCE trend, we weren't exactly thrilled.

Return On Capital Employed (ROCE): What Is It?

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. To calculate this metric for Elvalhalcor Hellenic Copper and Aluminium Industry, this is the formula:

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

0.058 = €103m ÷ (€2.3b - €568m) (Based on the trailing twelve months to December 2023).

So, Elvalhalcor Hellenic Copper and Aluminium Industry has an ROCE of 5.8%. In absolute terms, that's a low return and it also under-performs the Metals and Mining industry average of 10%.

View our latest analysis for Elvalhalcor Hellenic Copper and Aluminium Industry

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Elvalhalcor Hellenic Copper and Aluminium Industry.

The Trend Of ROCE

In terms of Elvalhalcor Hellenic Copper and Aluminium Industry's historical ROCE movements, the trend isn't fantastic. Over the last five years, returns on capital have decreased to 5.8% from 8.8% five years ago. And considering revenue has dropped while employing more capital, we'd be cautious. If this were to continue, you might be looking at a company that is trying to reinvest for growth but is actually losing market share since sales haven't increased.

In Conclusion...

We're a bit apprehensive about Elvalhalcor Hellenic Copper and Aluminium Industry because despite more capital being deployed in the business, returns on that capital and sales have both fallen. In spite of that, the stock has delivered a 20% return to shareholders who held over the last five years. Regardless, we don't like the trends as they are and if they persist, we think you might find better investments elsewhere.

Elvalhalcor Hellenic Copper and Aluminium Industry does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those is a bit concerning...

While Elvalhalcor Hellenic Copper and Aluminium Industry isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.