Trilogiq (EPA:ALTRI) Is Looking To Continue Growing Its Returns On Capital

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. 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, Trilogiq (EPA:ALTRI) 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. To calculate this metric for Trilogiq, this is the formula:

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

0.0042 = €159k ÷ (€40m - €2.0m) (Based on the trailing twelve months to September 2023).

Thus, Trilogiq has an ROCE of 0.4%. Ultimately, that's a low return and it under-performs the Machinery industry average of 9.1%.

See our latest analysis for Trilogiq

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

What Can We Tell From Trilogiq's ROCE Trend?

Shareholders will be relieved that Trilogiq has broken into profitability. While the business was unprofitable in the past, it's now turned things around and is earning 0.4% on its capital. On top of that, what's interesting is that the amount of capital being employed has remained steady, so the business hasn't needed to put any additional money to work to generate these higher returns. With no noticeable increase in capital employed, it's worth knowing what the company plans on doing going forward in regards to reinvesting and growing the business. Because in the end, a business can only get so efficient.

Our Take On Trilogiq's ROCE

To bring it all together, Trilogiq has done well to increase the returns it's generating from its capital employed. And a remarkable 116% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Trilogiq does have some risks though, and we've spotted 2 warning signs for Trilogiq that you might be interested in.

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

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com