Crypto Blockchain Industries' (EPA:ALCBI) Returns On Capital Not Reflecting Well On The Business

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. However, after investigating Crypto Blockchain Industries (EPA:ALCBI), 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 that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Crypto Blockchain Industries is:

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

0.082 = €1.8m ÷ (€27m - €5.2m) (Based on the trailing twelve months to September 2023).

Thus, Crypto Blockchain Industries has an ROCE of 8.2%. Ultimately, that's a low return and it under-performs the Software industry average of 11%.

View our latest analysis for Crypto Blockchain Industries

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

What The Trend Of ROCE Can Tell Us

The trend of ROCE doesn't look fantastic because it's fallen from 37% four years ago, while the business's capital employed increased by 2,364%. However, some of the increase in capital employed could be attributed to the recent capital raising that's been completed prior to their latest reporting period, so keep that in mind when looking at the ROCE decrease. The funds raised likely haven't been put to work yet so it's worth watching what happens in the future with Crypto Blockchain Industries' earnings and if they change as a result from the capital raise.

The Bottom Line On Crypto Blockchain Industries' ROCE

From the above analysis, we find it rather worrisome that returns on capital and sales for Crypto Blockchain Industries have fallen, meanwhile the business is employing more capital than it was four years ago. It should come as no surprise then that the stock has fallen 51% over the last year, so it looks like investors are recognizing these changes. With underlying trends that aren't great in these areas, we'd consider looking elsewhere.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 4 warning signs for Crypto Blockchain Industries (of which 1 doesn't sit too well with us!) that you should know about.

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.