Cogra 48 Société Anonyme (EPA:ALCOG) Is Doing The Right Things To Multiply Its Share Price

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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Speaking of which, we noticed some great changes in Cogra 48 Société Anonyme's (EPA:ALCOG) returns on capital, so let's have a look.

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 Cogra 48 Société Anonyme:

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

0.19 = €6.3m ÷ (€43m - €10m) (Based on the trailing twelve months to December 2022).

Therefore, Cogra 48 Société Anonyme has an ROCE of 19%. In absolute terms, that's a satisfactory return, but compared to the Forestry industry average of 13% it's much better.

Check out our latest analysis for Cogra 48 Société Anonyme

Historical performance is a great place to start when researching a stock so above you can see the gauge for Cogra 48 Société Anonyme's ROCE against it's prior returns. If you'd like to look at how Cogra 48 Société Anonyme has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What Can We Tell From Cogra 48 Société Anonyme's ROCE Trend?

Investors would be pleased with what's happening at Cogra 48 Société Anonyme. Over the last five years, returns on capital employed have risen substantially to 19%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 77%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Key Takeaway

To sum it up, Cogra 48 Société Anonyme has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 97% return over the last five years. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

On a final note, we've found 1 warning sign for Cogra 48 Société Anonyme that we think you should be aware of.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.