SA Onlineformapro (EPA:MLONL) Is Experiencing Growth In 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. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, SA Onlineformapro (EPA:MLONL) looks quite promising in regards to its trends of return on capital.

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

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. The formula for this calculation on SA Onlineformapro is:

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

0.14 = €1.8m ÷ (€19m - €5.2m) (Based on the trailing twelve months to June 2023).

So, SA Onlineformapro has an ROCE of 14%. That's a relatively normal return on capital, and it's around the 13% generated by the Consumer Services industry.

Check out our latest analysis for SA Onlineformapro

Historical performance is a great place to start when researching a stock so above you can see the gauge for SA Onlineformapro's ROCE against it's prior returns. If you're interested in investigating SA Onlineformapro's past further, check out this free graph covering SA Onlineformapro's past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

Investors would be pleased with what's happening at SA Onlineformapro. The data shows that returns on capital have increased substantially over the last four years to 14%. Basically the business is earning more per dollar of capital invested and in addition to that, 306% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

Our Take On SA Onlineformapro's ROCE

All in all, it's terrific to see that SA Onlineformapro is reaping the rewards from prior investments and is growing its capital base. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 73% return over the last three years. Therefore, we think it would be worth your time to check if these trends are going to continue.

One more thing, we've spotted 3 warning signs facing SA Onlineformapro that you might find interesting.

While SA Onlineformapro 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.