Cogra 48 Société Anonyme's (EPA:ALCOG) Returns On Capital Are Heading Higher

What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. So when we looked at Cogra 48 Société Anonyme (EPA:ALCOG) and its trend of ROCE, we really liked what we saw.

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. 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%. Even though it's in line with the industry average of 6.4%, it's still a low return by itself.

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. About five years ago the company was generating losses but things have turned around because it's now earning 5.6% on its capital. 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 tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

The Key Takeaway

Long story short, we're delighted to see that Cogra 48 Société Anonyme's reinvestment activities have paid off and the company is now profitable. Since the stock has returned a solid 48% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. In light of that, we think it's worth looking further into this stock because if Cogra 48 Société Anonyme can keep these trends up, it could have a bright future ahead.

Like most companies, Cogra 48 Société Anonyme does come with some risks, and we've found 2 warning signs that you should be aware of.

While Cogra 48 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.

If you decide to trade Cogra 48 Société Anonyme, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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