Returns On Capital At Attica Publications (ATH:ATEK) Have Hit The Brakes

What are the early trends we should look for to identify a stock that could 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So, when we ran our eye over Attica Publications' (ATH:ATEK) trend of ROCE, we liked what we saw.

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What Is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Attica Publications is:

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

0.19 = €3.0m ÷ (€30m - €14m) (Based on the trailing twelve months to December 2024).

So, Attica Publications has an ROCE of 19%. In absolute terms, that's a satisfactory return, but compared to the Media industry average of 11% it's much better.

Check out our latest analysis for Attica Publications

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're interested in investigating Attica Publications' past further, check out this free graph covering Attica Publications' past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

While the returns on capital are good, they haven't moved much. Over the past five years, ROCE has remained relatively flat at around 19% and the business has deployed 49% more capital into its operations. 19% is a pretty standard return, and it provides some comfort knowing that Attica Publications has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

On a side note, Attica Publications has done well to reduce current liabilities to 47% of total assets over the last five years. Effectively suppliers now fund less of the business, which can lower some elements of risk. Although because current liabilities are still 47%, some of that risk is still prevalent.

In Conclusion...

The main thing to remember is that Attica Publications has proven its ability to continually reinvest at respectable rates of return. And long term investors would be thrilled with the 222% return they've received over the last five years. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

One final note, you should learn about the 3 warning signs we've spotted with Attica Publications (including 2 which are a bit unpleasant) .

While Attica Publications may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.