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

What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at Trilogiq (EPA:ALTRI) and its trend of ROCE, we really liked what we saw.

We've discovered 1 warning sign about Trilogiq. View them for free.

Return On Capital Employed (ROCE): What Is It?

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 Trilogiq:

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

0.043 = €1.7m ÷ (€42m - €1.9m) (Based on the trailing twelve months to September 2024).

So, Trilogiq has an ROCE of 4.3%. In absolute terms, that's a low return and it also under-performs the Machinery industry average of 8.1%.

Check out 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're interested in investigating Trilogiq's past further, check out this free graph covering 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. The company was generating losses five years ago, but has managed to turn it around and as we saw earlier is now earning 4.3%, which is always encouraging. 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. So while we're happy that the business is more efficient, just keep in mind that could mean that going forward the business is lacking areas to invest internally for growth. Because in the end, a business can only get so efficient.

The Key Takeaway

In summary, we're delighted to see that Trilogiq has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And with a respectable 53% 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. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

If you want to continue researching Trilogiq, you might be interested to know about the 1 warning sign that our analysis has discovered.

While Trilogiq may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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

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.