There's Been No Shortage Of Growth Recently For Delfingen Industry's (EPA:ALDEL) Returns On Capital

Published
March 10, 2022
ENXTPA:ALDEL
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If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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. With that in mind, we've noticed some promising trends at Delfingen Industry (EPA:ALDEL) so let's look a bit deeper.

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. Analysts use this formula to calculate it for Delfingen Industry:

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

0.17 = €42m ÷ (€329m - €86m) (Based on the trailing twelve months to June 2021).

So, Delfingen Industry has an ROCE of 17%. In absolute terms, that's a satisfactory return, but compared to the Auto Components industry average of 11% it's much better.

See our latest analysis for Delfingen Industry

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ENXTPA:ALDEL Return on Capital Employed March 10th 2022

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're interested in investigating Delfingen Industry's past further, check out this free graph of past earnings, revenue and cash flow.

What Can We Tell From Delfingen Industry's ROCE Trend?

The trends we've noticed at Delfingen Industry are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 17%. The amount of capital employed has increased too, by 125%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

What We Can Learn From Delfingen Industry's ROCE

All in all, it's terrific to see that Delfingen Industry is reaping the rewards from prior investments and is growing its capital base. And with a respectable 57% 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 Delfingen Industry can keep these trends up, it could have a bright future ahead.

If you want to know some of the risks facing Delfingen Industry we've found 3 warning signs (2 are significant!) that you should be aware of before investing here.

While Delfingen Industry isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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

Find out whether Delfingen Industry 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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