We Like These Underlying Return On Capital Trends At UPERGY Société Anonyme (EPA:ALUPG)

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, we've noticed some promising trends at UPERGY Société Anonyme (EPA:ALUPG) 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 UPERGY Société Anonyme:

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

0.11 = €2.1m ÷ (€30m - €10m) (Based on the trailing twelve months to June 2022).

Therefore, UPERGY Société Anonyme has an ROCE of 11%. In absolute terms, that's a pretty standard return but compared to the Trade Distributors industry average it falls behind.

Check out our latest analysis for UPERGY Société Anonyme

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 UPERGY Société Anonyme's past further, check out this free graph of past earnings, revenue and cash flow.

How Are Returns Trending?

UPERGY Société Anonyme has not disappointed with their ROCE growth. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 72% in that same time. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

The Bottom Line On UPERGY Société Anonyme's ROCE

To sum it up, UPERGY Société Anonyme is collecting higher returns from the same amount of capital, and that's impressive. Astute investors may have an opportunity here because the stock has declined 42% in the last five years. So researching this company further and determining whether or not these trends will continue seems justified.

On a final note, we found 4 warning signs for UPERGY Société Anonyme (2 are concerning) you should be aware of.

While UPERGY Société Anonyme 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.

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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.