Advertisement
- Australia
- /
- Metals and Mining
- /
- ASX:CAA
The Trends At Capral (ASX:CAA) That You Should Know About
Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. However, after investigating Capral (ASX:CAA), we don't think it's current trends fit the mold of a multi-bagger.
Understanding 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. The formula for this calculation on Capral is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.041 = AU$7.6m ÷ (AU$282m - AU$94m) (Based on the trailing twelve months to December 2019).
Therefore, Capral has an ROCE of 4.1%. In absolute terms, that's a low return and it also under-performs the Metals and Mining industry average of 9.8%.
View our latest analysis for Capral
Historical performance is a great place to start when researching a stock so above you can see the gauge for Capral's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Capral, check out these free graphs here.
How Are Returns Trending?
In terms of Capral's historical ROCE trend, it doesn't exactly demand attention. Over the past five years, ROCE has remained relatively flat at around 4.1% and the business has deployed 59% more capital into its operations. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.
Our Take On Capral's ROCE
In summary, Capral has simply been reinvesting capital and generating the same low rate of return as before. And with the stock having returned a mere 7.2% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.
One final note, you should learn about the 4 warning signs we've spotted with Capral (including 1 which is is potentially serious) .
If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.
When trading Capral or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted
New: AI Stock Screener & Alerts
Our new AI Stock Screener scans the market every day to uncover opportunities.
• Dividend Powerhouses (3%+ Yield)
• Undervalued Small Caps with Insider Buying
• High growth Tech and AI Companies
Or build your own from over 50 metrics.
This article by Simply Wall St is general in nature. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.
About ASX:CAA
Capral
Together with its subsidiary, Austex Dies Pty Ltd, manufactures and distributes fabricated and semi-fabricated aluminum related products in Australia.
Flawless balance sheet and undervalued.
Market Insights
Advertisement
Weekly Picks
JO
Jolt_Communications on Myseum ·
The Future of Social Sharing Is Private and People Are Ready
Fair Value:US$7.9577.1% undervalued
20 followersusers have followed this narrative
0 commentsusers have commented on this narrative
0 likesusers have liked this narrative
TO
Tokyo on ASML Holding ·
EU#3 - From Philips Management Buyout to Europe’s Biggest Company
Fair Value:€1.31k7.1% undervalued
27 followersusers have followed this narrative
2 commentsusers have commented on this narrative
11 likesusers have liked this narrative
YI
yiannisz on Booking Holdings ·
Booking Holdings: Why Ground-Level Travel Trends Still Favor the Platform Giants
Fair Value:US$5.47k8.5% undervalued
6 followersusers have followed this narrative
0 commentsusers have commented on this narrative
4 likesusers have liked this narrative
CO
composite32 on Shell ·
A fully integrated LNG business seems to be ignored by the market.
Fair Value:UK£36.122.6% undervalued
35 followersusers have followed this narrative
0 commentsusers have commented on this narrative
9 likesusers have liked this narrative
Recently Updated Narratives
CO
composite32 on Otokar Otomotiv ve Savunma Sanayi ·
Otokar is the first choice for tactical armored land vehicles to meet Europe's defense industry needs.
Fair Value:₺668.1135.3% undervalued
1 followerusers have followed this narrative
0 commentsusers have commented on this narrative
0 likesusers have liked this narrative
BL
BlackGoat on Palantir Technologies ·
Palantir: Redefining Enterprise Software for the AI Era
Fair Value:US$107.0237.0% overvalued
197 followersusers have followed this narrative
6 commentsusers have commented on this narrative
2 likesusers have liked this narrative
AN
andre_santos on Microsoft ·
Microsoft - A Fundamental and Historical Valuation
Fair Value:US$437.171.6% undervalued
18 followersusers have followed this narrative
4 commentsusers have commented on this narrative
0 likesusers have liked this narrative
Popular Narratives
OO
OOO97 on Neo Performance Materials ·
Undervalued Key Player in Magnets/Rare Earth
Fair Value:CA$25.3324.4% undervalued
71 followersusers have followed this narrative
0 commentsusers have commented on this narrative
19 likesusers have liked this narrative
AN
AnalystConsensusTarget on NVIDIA ·
NVDA: Expanding AI Demand Will Drive Major Data Center Investments Through 2026
Fair Value:US$253.0224.5% undervalued
1047 followersusers have followed this narrative
6 commentsusers have commented on this narrative
31 likesusers have liked this narrative
AN
AnalystConsensusTarget on Amazon.com ·
AMZN: Acceleration In Cloud And AI Will Drive Margin Expansion Ahead
Fair Value:US$295.6119.1% undervalued
1343 followersusers have followed this narrative
5 commentsusers have commented on this narrative
11 likesusers have liked this narrative
Trending Discussion
JA
jayhcee on Motorcar Parts of America ·
MPAA often has inventory and core-related timing issues. While this quarter’s problems may ease, similar issues have recurred historically and can persist for several quarters. It's not a one-off, it's a structural part of their business. Core returns are simply estimates: How many customers will actually return the original part; how quickly they'll do so; how many are useable; what they're worth, etc. MPAA predicts X sales in a quarter and Y core returns and its reserves, inventory values, etc. are based on that. If they expect a 90% core return rate and only 80% come back it doesn't change cash but they have to write down inventory and increase cost of goods sold which impacts EPS. They've also cited inventory buildup at key customers multiple times in the past. The assumption the latest backlog will all shift into future quarters this year with no impact on pricing, etc. seems more like wishful thinking. Retailer X was slated to buy $10m in parts this quarter but finds they have a lot more inventory on hand than they anticipated so they pushed the order. Realistically there are likely to be SKU cuts, reduction in safety stock on others, etc. Assuming that all $10m will come in this year plus the regular replenishment seems pretty unrealistic. MPAA also has a shaky track record when it comes to new lines and the supposed impact on business. If you look at the EV testing solutions hype back around 2020 that was supposed to diversify them beyond traditional reman and be a higher margin business that would grow with EV adoption. But it has never turned into a material contributor. The debt reduction and stock buy backs are meaningful but IMHO this narrative takes a very optimistic view of things.
0
|0
US
User on Discovery Silver ·
The problem with your reasoning is, that 37 Moz are AgEq. If you read the FS, you'll find out that annual silver production is more around 14-15 Moz. But at the time of the FS, that 37 Moz AgEq was a number that came of a formula (which is specified in the FS), being a mix of four metals: Ag, Au, Pb and Zc. But now, beginning of 2026, the spotprices of silver and gold have risen so much in comparison to Pb and Zc prices, that you need to recalculate the AgEq number of 37 Moz according to the recent prices. This will result in the fact that silver and gold hold more value in that mix of four metals, and thus dragg the 37 Moz AgEQ number down to somewhere around 18 Moz AgEq. The more valuable silver and gold become, the lower the AgEq number will get, but it'll never get under the yearly average production of silver, which should be somewhere between 14-15 Moz Ag in the first four years. So in short, with this in mind, your fair value is rather around CA$ 50, even with silver at 300 usd an ounce. But a more prudent stockprice forecast is around CA$ 20 and hopefully going toward CA$ 30. So DSV is a top stock, because it's producing actual gold every quarter. But don't put your hopes too high.
0
|0