We're Watching These Trends At Agrícola NacionalC. é I (SNSE:ANASAC)

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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. That's why when we briefly looked at Agrícola NacionalC. é I's (SNSE:ANASAC) ROCE trend, we were pretty happy with 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. The formula for this calculation on Agrícola NacionalC. é I is:

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

0.19 = CL$28b ÷ (CL$247b - CL$99b) (Based on the trailing twelve months to September 2020).

Therefore, Agrícola NacionalC. é I has an ROCE of 19%. On its own, that's a standard return, however it's much better than the 7.9% generated by the Food industry.

View our latest analysis for Agrícola NacionalC. é I

Historical performance is a great place to start when researching a stock so above you can see the gauge for Agrícola NacionalC. é I's ROCE against it's prior returns. If you'd like to look at how Agrícola NacionalC. é I has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

So How Is Agrícola NacionalC. é I's ROCE Trending?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has employed 36% more capital in the last five years, and the returns on that capital have remained stable at 19%. Since 19% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

On a side note, Agrícola NacionalC. é I's current liabilities are still rather high at 40% of total assets. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

Our Take On Agrícola NacionalC. é I's ROCE

The main thing to remember is that Agrícola NacionalC. é I has proven its ability to continually reinvest at respectable rates of return. And given the stock has only risen 22% over the last five years, we'd suspect the market is beginning to recognize these trends. That's why it could be worth your time looking into this stock further to discover if it has more traits of a multi-bagger.

On a final note, we've found 3 warning signs for Agrícola NacionalC. é I that we think you should be aware of.

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This article by Simply Wall St is general in nature. 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.
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