Returns At FrigoglassI.C (ATH:FRIGO) Appear To Be Weighed Down

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. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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. Although, when we looked at FrigoglassI.C (ATH:FRIGO), it didn't seem to tick all of these boxes.

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. The formula for this calculation on FrigoglassI.C is:

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

0.15 = €36m ÷ (€463m - €232m) (Based on the trailing twelve months to June 2022).

Thus, FrigoglassI.C has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 11% generated by the Machinery industry.

Check out our latest analysis for FrigoglassI.C

Historical performance is a great place to start when researching a stock so above you can see the gauge for FrigoglassI.C's ROCE against it's prior returns. If you're interested in investigating FrigoglassI.C's past further, check out this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For FrigoglassI.C Tell Us?

Over the past four years, FrigoglassI.C's ROCE and capital employed have both remained mostly flat. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So don't be surprised if FrigoglassI.C doesn't end up being a multi-bagger in a few years time.

On a separate but related note, it's important to know that FrigoglassI.C has a current liabilities to total assets ratio of 50%, which we'd consider pretty high. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

The Bottom Line On FrigoglassI.C's ROCE

In summary, FrigoglassI.C isn't compounding its earnings but is generating stable returns on the same amount of capital employed. And investors appear hesitant that the trends will pick up because the stock has fallen 55% in the last five years. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

On a final note, we found 5 warning signs for FrigoglassI.C (4 are a bit unpleasant) you should be aware of.

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.