Will The ROCE Trend At AGRANA Beteiligungs-Aktiengesellschaft (VIE:AGR) Continue?

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. So on that note, AGRANA Beteiligungs-Aktiengesellschaft (VIE:AGR) looks quite promising in regards to its trends of return on capital.

Understanding 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. To calculate this metric for AGRANA Beteiligungs-Aktiengesellschaft, this is the formula:

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

0.041 = €79m ÷ (€2.5b - €570m) (Based on the trailing twelve months to November 2020).

So, AGRANA Beteiligungs-Aktiengesellschaft has an ROCE of 4.1%. Ultimately, that's a low return and it under-performs the Food industry average of 8.2%.

See our latest analysis for AGRANA Beteiligungs-Aktiengesellschaft

Above you can see how the current ROCE for AGRANA Beteiligungs-Aktiengesellschaft compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for AGRANA Beteiligungs-Aktiengesellschaft.

How Are Returns Trending?

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. The data shows that returns on capital have increased substantially over the last five years to 4.1%. 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 23%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

One more thing to note, AGRANA Beteiligungs-Aktiengesellschaft has decreased current liabilities to 23% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance.

The Key Takeaway

All in all, it's terrific to see that AGRANA Beteiligungs-Aktiengesellschaft is reaping the rewards from prior investments and is growing its capital base. Considering the stock has delivered 10% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

One more thing, we've spotted 2 warning signs facing AGRANA Beteiligungs-Aktiengesellschaft that you might find interesting.

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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