Elvalhalcor Hellenic Copper and Aluminium Industry (ATH:ELHA) Might Have The Makings Of A Multi-Bagger

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. With that in mind, we've noticed some promising trends at Elvalhalcor Hellenic Copper and Aluminium Industry (ATH:ELHA) so let's look a bit deeper.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Elvalhalcor Hellenic Copper and Aluminium Industry, this is the formula:

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

0.11 = €212m ÷ (€2.6b - €763m) (Based on the trailing twelve months to March 2023).

So, Elvalhalcor Hellenic Copper and Aluminium Industry has an ROCE of 11%. By itself that's a normal return on capital and it's in line with the industry's average returns of 11%.

Check out our latest analysis for Elvalhalcor Hellenic Copper and Aluminium Industry

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings, revenue and cash flow of Elvalhalcor Hellenic Copper and Aluminium Industry, check out these free graphs here.

What The Trend Of ROCE Can Tell Us

The trends we've noticed at Elvalhalcor Hellenic Copper and Aluminium Industry are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 11%. Basically the business is earning more per dollar of capital invested and in addition to that, 69% more capital is being employed now too. So we're very much inspired by what we're seeing at Elvalhalcor Hellenic Copper and Aluminium Industry thanks to its ability to profitably reinvest capital.

What We Can Learn From Elvalhalcor Hellenic Copper and Aluminium Industry's ROCE

All in all, it's terrific to see that Elvalhalcor Hellenic Copper and Aluminium Industry is reaping the rewards from prior investments and is growing its capital base. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 58% return over the last five years. In light of that, we think it's worth looking further into this stock because if Elvalhalcor Hellenic Copper and Aluminium Industry can keep these trends up, it could have a bright future ahead.

Elvalhalcor Hellenic Copper and Aluminium Industry does have some risks though, and we've spotted 3 warning signs for Elvalhalcor Hellenic Copper and Aluminium Industry that you might be interested in.

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.