Returns At AntarChile (SNSE:ANTARCHILE) Are On The Way Up
If you're looking for a multi-bagger, there's a few things to keep an eye out for. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at AntarChile (SNSE:ANTARCHILE) and its trend of ROCE, we really liked what we saw.
Understanding Return On Capital Employed (ROCE)
For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for AntarChile, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.12 = US$2.8b ÷ (US$27b - US$4.4b) (Based on the trailing twelve months to September 2022).
Therefore, AntarChile has an ROCE of 12%. In absolute terms, that's a satisfactory return, but compared to the Industrials industry average of 6.6% it's much better.
See our latest analysis for AntarChile
Above you can see how the current ROCE for AntarChile 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 AntarChile Tell Us?
AntarChile's ROCE growth is quite impressive. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 81% over the last five years. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.
As discussed above, AntarChile appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. And since the stock has fallen 19% over the last five years, there might be an opportunity here. With that in mind, we believe the promising trends warrant this stock for further investigation.
One more thing: We've identified 2 warning signs with AntarChile (at least 1 which doesn't sit too well with us) , and understanding these would certainly be useful.
If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.
AntarChile S.A. invests in forestry, fishing, fuel distribution, energy, mining, and other sectors in South America and internationally.
Fair value with imperfect balance sheet.