Here’s What’s Happening With Returns At EL. D. Mouzakis (ATH:MOYZK)

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, we've noticed some promising trends at EL. D. Mouzakis (ATH:MOYZK) so let's look a bit deeper.

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 EL. D. Mouzakis is:

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

0.0061 = €347k ÷ (€58m - €1.0m) (Based on the trailing twelve months to June 2020).

So, EL. D. Mouzakis has an ROCE of 0.6%. In absolute terms, that's a low return and it also under-performs the Luxury industry average of 8.0%.

View our latest analysis for EL. D. Mouzakis

Historical performance is a great place to start when researching a stock so above you can see the gauge for EL. D. Mouzakis' ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of EL. D. Mouzakis, check out these free graphs here.

What Does the ROCE Trend For EL. D. Mouzakis Tell Us?

EL. D. Mouzakis has broken into the black (profitability) and we're sure it's a sight for sore eyes. The company now earns 0.6% on its capital, because five years ago it was incurring losses. On top of that, what's interesting is that the amount of capital being employed has remained steady, so the business hasn't needed to put any additional money to work to generate these higher returns. That being said, while an increase in efficiency is no doubt appealing, it'd be helpful to know if the company does have any investment plans going forward. So if you're looking for high growth, you'll want to see a business's capital employed also increasing.

One more thing to note, EL. D. Mouzakis has decreased current liabilities to 1.8% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. Therefore we can rest assured that the growth in ROCE is a result of the business' fundamental improvements, rather than a cooking class featuring this company's books.

The Bottom Line On EL. D. Mouzakis' ROCE

To sum it up, EL. D. Mouzakis is collecting higher returns from the same amount of capital, and that's impressive. And a remarkable 211% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if EL. D. Mouzakis can keep these trends up, it could have a bright future ahead.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 3 warning signs for EL. D. Mouzakis (of which 1 is a bit unpleasant!) 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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