Be Wary Of Moulinvest (EPA:ALMOU) And Its Returns On Capital

What trends should we look for it we want to identify stocks that can 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after investigating Moulinvest (EPA:ALMOU), we don't think it's current trends fit the mold of a multi-bagger.

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

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Moulinvest, this is the formula:

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

0.000095 = €9.0k ÷ (€145m - €51m) (Based on the trailing twelve months to August 2024).

Thus, Moulinvest has an ROCE of 0.01%. Ultimately, that's a low return and it under-performs the Forestry industry average of 6.1%.

View our latest analysis for Moulinvest

Above you can see how the current ROCE for Moulinvest compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Moulinvest .

How Are Returns Trending?

In terms of Moulinvest's historical ROCE movements, the trend isn't fantastic. Over the last five years, returns on capital have decreased to 0.01% from 7.5% five years ago. However it looks like Moulinvest might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

What We Can Learn From Moulinvest's ROCE

To conclude, we've found that Moulinvest is reinvesting in the business, but returns have been falling. Yet to long term shareholders the stock has gifted them an incredible 221% return in the last five years, so the market appears to be rosy about its future. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

If you want to continue researching Moulinvest, you might be interested to know about the 1 warning sign that our analysis has discovered.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.