Cogra 48 Société Anonyme (EPA:ALCOG) Is Looking To Continue Growing Its Returns On Capital

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at Cogra 48 Société Anonyme (EPA:ALCOG) and its trend of ROCE, we really liked what we saw.

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 Cogra 48 Société Anonyme:

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

0.056 = €1.7m ÷ (€35m - €5.3m) (Based on the trailing twelve months to December 2020).

So, Cogra 48 Société Anonyme has an ROCE of 5.6%. Ultimately, that's a low return and it under-performs the Forestry industry average of 7.7%.

See our latest analysis for Cogra 48 Société Anonyme

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 want to delve into the historical earnings, revenue and cash flow of Cogra 48 Société Anonyme, check out these free graphs here.

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

The fact that Cogra 48 Société Anonyme is now generating some pre-tax profits from its prior investments is very encouraging. The company was generating losses five years ago, but now it's earning 5.6% which is a sight for sore eyes. Not only that, but the company is utilizing 76% more capital than before, but that's to be expected from a company trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

The Key Takeaway

In summary, it's great to see that Cogra 48 Société Anonyme has managed to break into profitability and is continuing to reinvest in its business. Since the stock has only returned 30% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

Cogra 48 Société Anonyme does have some risks though, and we've spotted 2 warning signs for Cogra 48 Société Anonyme that you might be interested in.

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.
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