Returns On Capital At Groupe Airwell Société anonyme (EPA:ALAIR) Have Stalled

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. In light of that, when we looked at Groupe Airwell Société anonyme (EPA:ALAIR) and its ROCE trend, we weren't exactly thrilled.

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. Analysts use this formula to calculate it for Groupe Airwell Société anonyme:

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

0.086 = €2.8m ÷ (€47m - €15m) (Based on the trailing twelve months to December 2023).

Thus, Groupe Airwell Société anonyme has an ROCE of 8.6%. In absolute terms, that's a low return and it also under-performs the Consumer Durables industry average of 12%.

View our latest analysis for Groupe Airwell Société anonyme

In the above chart we have measured Groupe Airwell Société anonyme's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Groupe Airwell Société anonyme .

So How Is Groupe Airwell Société anonyme's ROCE Trending?

In terms of Groupe Airwell Société anonyme's historical ROCE trend, it doesn't exactly demand attention. Over the past two years, ROCE has remained relatively flat at around 8.6% and the business has deployed 62% more capital into its operations. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

What We Can Learn From Groupe Airwell Société anonyme's ROCE

Long story short, while Groupe Airwell Société anonyme has been reinvesting its capital, the returns that it's generating haven't increased. Since the stock has declined 30% over the last year, investors may not be too optimistic on this trend improving either. Therefore based on the analysis done in this article, we don't think Groupe Airwell Société anonyme has the makings of a multi-bagger.

On a final note, we found 4 warning signs for Groupe Airwell Société anonyme (2 can't be ignored) you should be aware of.

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

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.

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