Returns On Capital At Delta Plus Group (EPA:ALDLT) Have Hit The Brakes

By
Simply Wall St
Published
March 17, 2022
ENXTPA:ALDLT
Source: Shutterstock

There are a few key trends to look for if we want to identify the next multi-bagger. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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, the ROCE of Delta Plus Group (EPA:ALDLT) looks decent, right now, so lets see what the trend of returns can tell us.

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. The formula for this calculation on Delta Plus Group is:

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

0.16 = €46m ÷ (€411m - €120m) (Based on the trailing twelve months to June 2021).

Thus, Delta Plus Group has an ROCE of 16%. In absolute terms, that's a satisfactory return, but compared to the Commercial Services industry average of 7.7% it's much better.

View our latest analysis for Delta Plus Group

roce
ENXTPA:ALDLT Return on Capital Employed March 17th 2022

Above you can see how the current ROCE for Delta Plus Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Delta Plus Group here for free.

The Trend Of ROCE

The trend of ROCE doesn't stand out much, but returns on a whole are decent. Over the past five years, ROCE has remained relatively flat at around 16% and the business has deployed 131% more capital into its operations. 16% is a pretty standard return, and it provides some comfort knowing that Delta Plus Group has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

Our Take On Delta Plus Group's ROCE

To sum it up, Delta Plus Group has simply been reinvesting capital steadily, at those decent rates of return. And the stock has done incredibly well with a 178% return over the last five years, so long term investors are no doubt ecstatic with that result. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

On a final note, we've found 1 warning sign for Delta Plus Group that we think you should be aware of.

While Delta Plus Group 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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