Returns On Capital At Union Coop (DFM:UNIONCOOP) Have Stalled

There are a few key trends to look for if we want to identify the next multi-bagger. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. 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 Union Coop (DFM:UNIONCOOP), we don't think it's current trends fit the mold of a multi-bagger.

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What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Union Coop is:

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

0.13 = د.إ418m ÷ (د.إ3.7b - د.إ567m) (Based on the trailing twelve months to December 2024).

Therefore, Union Coop has an ROCE of 13%. That's a relatively normal return on capital, and it's around the 12% generated by the Consumer Retailing industry.

View our latest analysis for Union Coop

Historical performance is a great place to start when researching a stock so above you can see the gauge for Union Coop's ROCE against it's prior returns. If you'd like to look at how Union Coop has performed in the past in other metrics, you can view this free graph of Union Coop's past earnings, revenue and cash flow.

How Are Returns Trending?

There hasn't been much to report for Union Coop's returns and its level of capital employed because both metrics have been steady for the past five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So don't be surprised if Union Coop doesn't end up being a multi-bagger in a few years time.

The Key Takeaway

In a nutshell, Union Coop has been trudging along with the same returns from the same amount of capital over the last five years. And in the last year, the stock has given away 13% so the market doesn't look too hopeful on these trends strengthening any time soon. Therefore based on the analysis done in this article, we don't think Union Coop has the makings of a multi-bagger.

On a final note, we found 2 warning signs for Union Coop (1 is concerning) you should be aware of.

While Union Coop 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.