AGRANA Beteiligungs-Aktiengesellschaft (VIE:AGR) Is Reinvesting At Lower Rates Of Return

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. However, after investigating AGRANA Beteiligungs-Aktiengesellschaft (VIE:AGR), we don't think it's current trends fit the mold of a multi-bagger.

Return On Capital Employed (ROCE): What is it?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for AGRANA Beteiligungs-Aktiengesellschaft:

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

0.032 = €62m ÷ (€2.5b - €546m) (Based on the trailing twelve months to February 2021).

Thus, AGRANA Beteiligungs-Aktiengesellschaft has an ROCE of 3.2%. In absolute terms, that's a low return and it also under-performs the Food industry average of 7.7%.

Check out our latest analysis for AGRANA Beteiligungs-Aktiengesellschaft

In the above chart we have measured AGRANA Beteiligungs-Aktiengesellschaft'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 AGRANA Beteiligungs-Aktiengesellschaft.

So How Is AGRANA Beteiligungs-Aktiengesellschaft's ROCE Trending?

When we looked at the ROCE trend at AGRANA Beteiligungs-Aktiengesellschaft, we didn't gain much confidence. To be more specific, ROCE has fallen from 6.3% over the last five years. On the other hand, the company has been employing more capital without a corresponding improvement in sales in the last year, which could suggest these investments are longer term plays. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

The Bottom Line On AGRANA Beteiligungs-Aktiengesellschaft's ROCE

Bringing it all together, while we're somewhat encouraged by AGRANA Beteiligungs-Aktiengesellschaft's reinvestment in its own business, we're aware that returns are shrinking. And investors may be recognizing these trends since the stock has only returned a total of 0.5% to shareholders over the last five years. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

AGRANA Beteiligungs-Aktiengesellschaft does have some risks though, and we've spotted 2 warning signs for AGRANA Beteiligungs-Aktiengesellschaft that you might be interested in.

While AGRANA Beteiligungs-Aktiengesellschaft 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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