Returns At Hopscotch Global PR Group (EPA:ALHOP) Are On The Way Up

Explore Hopscotch Global PR Group's Fair Values from the Community and select yours

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. So on that note, Hopscotch Global PR Group (EPA:ALHOP) looks quite promising in regards to its trends of return on capital.

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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. The formula for this calculation on Hopscotch Global PR Group is:

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

0.10 = €9.2m ÷ (€205m - €117m) (Based on the trailing twelve months to December 2024).

Thus, Hopscotch Global PR Group has an ROCE of 10%. That's a relatively normal return on capital, and it's around the 12% generated by the Media industry.

View our latest analysis for Hopscotch Global PR Group

Above you can see how the current ROCE for Hopscotch Global PR Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Hopscotch Global PR Group .

What Can We Tell From Hopscotch Global PR Group's ROCE Trend?

Investors would be pleased with what's happening at Hopscotch Global PR Group. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 10%. 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 65%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

Another thing to note, Hopscotch Global PR Group has a high ratio of current liabilities to total assets of 57%. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

Our Take On Hopscotch Global PR Group's ROCE

To sum it up, Hopscotch Global PR Group has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 250% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

One more thing, we've spotted 3 warning signs facing Hopscotch Global PR Group that you might find interesting.

While Hopscotch Global PR Group 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.