Stock Analysis

Returns On Capital Are Showing Encouraging Signs At Aleia Holding (HMSE:EBGK)

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What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, 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. So on that note, Aleia Holding (HMSE:EBGK) looks quite promising in regards to its trends of return on capital.

What Is 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 Aleia Holding is:

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

0.00047 = €8.2k ÷ (€18m - €596k) (Based on the trailing twelve months to December 2022).

So, Aleia Holding has an ROCE of 0.05%. Ultimately, that's a low return and it under-performs the Construction industry average of 9.7%.

Check out our latest analysis for Aleia Holding

HMSE:EBGK Return on Capital Employed March 19th 2023

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

So How Is Aleia Holding's ROCE Trending?

We're delighted to see that Aleia Holding is reaping rewards from its investments and has now broken into profitability. The company was generating losses three years ago, but has managed to turn it around and as we saw earlier is now earning 0.05%, which is always encouraging. Interestingly, the capital employed by the business has remained relatively flat, so these higher returns are either from prior investments paying off or increased efficiencies. That being said, while an increase in efficiency is no doubt appealing, it'd be helpful to know if the company does have any investment plans going forward. Because in the end, a business can only get so efficient.

What We Can Learn From Aleia Holding's ROCE

To sum it up, Aleia Holding is collecting higher returns from the same amount of capital, and that's impressive. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. Therefore, we think it would be worth your time to check if these trends are going to continue.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 2 warning signs for Aleia Holding (of which 1 doesn't sit too well with us!) that you should know about.

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.

Valuation is complex, but we're helping make it simple.

Find out whether Aleia Holding is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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