Can Aeroporto Guglielmo Marconi di Bologna (BIT:ADB) Continue To Grow Its Returns On Capital?

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings back into the business at ever-higher rates of return. So when we looked at Aeroporto Guglielmo Marconi di Bologna (BIT:ADB) and its trend of ROCE, we really liked what we saw.

What is 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. To calculate this metric for Aeroporto Guglielmo Marconi di Bologna, this is the formula:

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

0.12 = €26m ÷ (€265m - €56m) (Based on the trailing twelve months to March 2020).

So, Aeroporto Guglielmo Marconi di Bologna has an ROCE of 12%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Infrastructure industry average of 10%.

View our latest analysis for Aeroporto Guglielmo Marconi di Bologna

In the above chart we have a measured Aeroporto Guglielmo Marconi di Bologna's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Aeroporto Guglielmo Marconi di Bologna.

What Does the ROCE Trend For Aeroporto Guglielmo Marconi di Bologna Tell Us?

Investors would be pleased with what's happening at Aeroporto Guglielmo Marconi di Bologna. The data shows that returns on capital have increased substantially over the last five years to 12%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 27%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line

All in all, it's terrific to see that Aeroporto Guglielmo Marconi di Bologna is reaping the rewards from prior investments and is growing its capital base. Astute investors may have an opportunity here because the stock has declined 34% in the last three years. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

While Aeroporto Guglielmo Marconi di Bologna looks impressive, no company is worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether ADB is currently trading for a fair price.

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

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