Returns Are Gaining Momentum At Kri-Kri Milk Industry (ATH:KRI)

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding 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. With that in mind, we've noticed some promising trends at Kri-Kri Milk Industry (ATH:KRI) 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. Analysts use this formula to calculate it for Kri-Kri Milk Industry:

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

0.19 = €18m ÷ (€115m - €20m) (Based on the trailing twelve months to December 2020).

So, Kri-Kri Milk Industry has an ROCE of 19%. On its own, that's a standard return, however it's much better than the 4.2% generated by the Food industry.

See our latest analysis for Kri-Kri Milk Industry

In the above chart we have measured Kri-Kri Milk Industry's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Kri-Kri Milk Industry here for free.

The Trend Of ROCE

We like the trends that we're seeing from Kri-Kri Milk Industry. Over the last five years, returns on capital employed have risen substantially to 19%. 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 83%. So we're very much inspired by what we're seeing at Kri-Kri Milk Industry thanks to its ability to profitably reinvest capital.

The Bottom Line On Kri-Kri Milk Industry's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Kri-Kri Milk Industry has. Since the stock has returned a staggering 419% to shareholders over the last five years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

One more thing, we've spotted 1 warning sign facing Kri-Kri Milk Industry that you might find interesting.

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. 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.
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