Why We Like The Returns 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. 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. So when we looked at the ROCE trend of Kri-Kri Milk Industry (ATH:KRI) we really liked what we saw.

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What Is Return On Capital Employed (ROCE)?

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. To calculate this metric for Kri-Kri Milk Industry, this is the formula:

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

0.29 = €42m ÷ (€185m - €40m) (Based on the trailing twelve months to September 2024).

Thus, Kri-Kri Milk Industry has an ROCE of 29%. In absolute terms that's a great return and it's even better than the Food industry average of 11%.

Check out our latest analysis for Kri-Kri Milk Industry

Above you can see how the current ROCE for Kri-Kri Milk Industry compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Kri-Kri Milk Industry for free.

The Trend Of ROCE

The trends we've noticed at Kri-Kri Milk Industry are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 29%. The amount of capital employed has increased too, by 71%. 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.

The Bottom Line

All in all, it's terrific to see that Kri-Kri Milk Industry is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 248% to shareholders over the last five years, it looks like investors are recognizing these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 2 warning signs for Kri-Kri Milk Industry (of which 1 doesn't sit too well with us!) that you should know about.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning 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.