Sapmer (EPA:ALMER) Shareholders Will Want The ROCE Trajectory To Continue

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So on that note, Sapmer (EPA:ALMER) looks quite promising in regards to its trends of return on capital.

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What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Sapmer:

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

0.076 = €7.5m ÷ (€132m - €33m) (Based on the trailing twelve months to June 2025).

Thus, Sapmer has an ROCE of 7.6%. On its own that's a low return on capital but it's in line with the industry's average returns of 8.2%.

Check out our latest analysis for Sapmer

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'd like to look at how Sapmer has performed in the past in other metrics, you can view this free graph of Sapmer's past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

Like most people, we're pleased that Sapmer is now generating some pretax earnings. Historically the company was generating losses but as we can see from the latest figures referenced above, they're now earning 7.6% on their capital employed. At first glance, it seems the business is getting more proficient at generating returns, because over the same period, the amount of capital employed has reduced by 53%. Sapmer could be selling under-performing assets since the ROCE is improving.

In Conclusion...

In a nutshell, we're pleased to see that Sapmer has been able to generate higher returns from less capital. Astute investors may have an opportunity here because the stock has declined 39% in the last five years. So researching this company further and determining whether or not these trends will continue seems justified.

Sapmer does come with some risks though, we found 3 warning signs in our investment analysis, and 2 of those are a bit unpleasant...

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

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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.