The Returns At Alkis H. Hadjikyriacos (Frou Frou Biscuits) (CSE:FBI) Provide Us With Signs Of What's To Come

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. In light of that, when we looked at Alkis H. Hadjikyriacos (Frou Frou Biscuits) (CSE:FBI) and its ROCE trend, we weren't exactly thrilled.

What is 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. Analysts use this formula to calculate it for Alkis H. Hadjikyriacos (Frou Frou Biscuits):

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

0.024 = €1.7m ÷ (€80m - €9.3m) (Based on the trailing twelve months to June 2020).

Thus, Alkis H. Hadjikyriacos (Frou Frou Biscuits) has an ROCE of 2.4%. Ultimately, that's a low return and it under-performs the Food industry average of 9.7%.

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

Historical performance is a great place to start when researching a stock so above you can see the gauge for Alkis H. Hadjikyriacos (Frou Frou Biscuits)'s ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Alkis H. Hadjikyriacos (Frou Frou Biscuits), check out these free graphs here.

How Are Returns Trending?

On the surface, the trend of ROCE at Alkis H. Hadjikyriacos (Frou Frou Biscuits) doesn't inspire confidence. Over the last five years, returns on capital have decreased to 2.4% from 5.2% five years ago. Meanwhile, the business is utilizing more capital but this hasn't moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

Our Take On Alkis H. Hadjikyriacos (Frou Frou Biscuits)'s ROCE

To conclude, we've found that Alkis H. Hadjikyriacos (Frou Frou Biscuits) is reinvesting in the business, but returns have been falling. And investors may be recognizing these trends since the stock has only returned a total of 34% to shareholders over the last five years. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.

Alkis H. Hadjikyriacos (Frou Frou Biscuits) does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those shouldn't be ignored...

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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