Alkis H. Hadjikyriacos (Frou Frou Biscuits) (CSE:FBI) Shareholders Will Want The ROCE Trajectory To Continue

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. 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 Alkis H. Hadjikyriacos (Frou Frou Biscuits) (CSE:FBI) and its trend of ROCE, we really liked what we saw.

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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. The formula for this calculation on Alkis H. Hadjikyriacos (Frou Frou Biscuits) is:

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

0.031 = €2.5m ÷ (€91m - €11m) (Based on the trailing twelve months to December 2024).

Thus, Alkis H. Hadjikyriacos (Frou Frou Biscuits) has an ROCE of 3.1%. Ultimately, that's a low return and it under-performs the Food industry average of 9.6%.

Check out our latest analysis for Alkis H. Hadjikyriacos (Frou Frou Biscuits)

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Alkis H. Hadjikyriacos (Frou Frou Biscuits).

So How Is Alkis H. Hadjikyriacos (Frou Frou Biscuits)'s ROCE Trending?

While there are companies with higher returns on capital out there, we still find the trend at Alkis H. Hadjikyriacos (Frou Frou Biscuits) promising. 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 39% 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. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

What We Can Learn From Alkis H. Hadjikyriacos (Frou Frou Biscuits)'s ROCE

To sum it up, Alkis H. Hadjikyriacos (Frou Frou Biscuits) is collecting higher returns from the same amount of capital, and that's impressive. And with a respectable 93% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. In light of that, we think it's worth looking further into this stock because if Alkis H. Hadjikyriacos (Frou Frou Biscuits) can keep these trends up, it could have a bright future ahead.

One more thing to note, we've identified 2 warning signs with Alkis H. Hadjikyriacos (Frou Frou Biscuits) and understanding them should be part of your investment process.

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.