We Think Andlauer Healthcare Group (TSE:AND) Might Have The DNA Of A Multi-Bagger

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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 when we looked at the ROCE trend of Andlauer Healthcare Group (TSE:AND) we really liked what we saw.

What is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed 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)

0.21 = CA$66m ÷ (CA$396m - CA$81m) (Based on the trailing twelve months to September 2021).

Therefore, Andlauer Healthcare Group has an ROCE of 21%. That's a fantastic return and not only that, it outpaces the average of 7.0% earned by companies in a similar industry.

View our latest analysis for Andlauer Healthcare Group

In the above chart we have measured Andlauer Healthcare Group'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 Andlauer Healthcare Group.

The Trend Of ROCE

The trends we've noticed at Andlauer Healthcare Group are quite reassuring. Over the last four years, returns on capital employed have risen substantially to 21%. The amount of capital employed has increased too, by 39%. So we're very much inspired by what we're seeing at Andlauer Healthcare Group thanks to its ability to profitably reinvest capital.

The Key Takeaway

All in all, it's terrific to see that Andlauer Healthcare Group is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a solid 44% to shareholders over the last year, it's fair to say investors are beginning to recognize these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

On a final note, we've found 2 warning signs for Andlauer Healthcare Group that we think you should be aware of.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning 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.