The Returns At Andlauer Healthcare Group (TSE:AND) Aren't Growing

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. That's why when we briefly looked at Andlauer Healthcare Group's (TSE:AND) ROCE trend, we were pretty happy with what we saw.

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

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 Andlauer Healthcare Group, this is the formula:

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

0.13 = CA$74m ÷ (CA$644m - CA$91m) (Based on the trailing twelve months to December 2021).

Thus, Andlauer Healthcare Group has an ROCE of 13%. On its own, that's a standard return, however it's much better than the 8.2% generated by the Healthcare industry.

See our latest analysis for Andlauer Healthcare Group

Above you can see how the current ROCE for Andlauer Healthcare Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

What Does the ROCE Trend For Andlauer Healthcare Group Tell Us?

While the current returns on capital are decent, they haven't changed much. The company has employed 153% more capital in the last five years, and the returns on that capital have remained stable at 13%. 13% is a pretty standard return, and it provides some comfort knowing that Andlauer Healthcare Group has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

Our Take On Andlauer Healthcare Group's ROCE

To sum it up, Andlauer Healthcare Group has simply been reinvesting capital steadily, at those decent rates of return. And the stock has followed suit returning a meaningful 19% to shareholders over the last year. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

If you'd like to know about the risks facing Andlauer Healthcare Group, we've discovered 3 warning signs that you should be aware of.

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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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.