Stock Analysis

Return Trends At Plaisio Computers (ATH:PLAIS) Aren't Appealing

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ATSE:PLAIS
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If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. In light of that, when we looked at Plaisio Computers (ATH:PLAIS) and its ROCE trend, we weren't exactly thrilled.

Return On Capital Employed (ROCE): What Is It?

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 Plaisio Computers, this is the formula:

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

0.071 = €11m ÷ (€220m - €71m) (Based on the trailing twelve months to June 2022).

Therefore, Plaisio Computers has an ROCE of 7.1%. In absolute terms, that's a low return but it's around the Specialty Retail industry average of 6.4%.

Check out our latest analysis for Plaisio Computers

roce
ATSE:PLAIS Return on Capital Employed September 27th 2022

Above you can see how the current ROCE for Plaisio Computers compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

What Can We Tell From Plaisio Computers' ROCE Trend?

There are better returns on capital out there than what we're seeing at Plaisio Computers. Over the past five years, ROCE has remained relatively flat at around 7.1% and the business has deployed 54% more capital into its operations. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

What We Can Learn From Plaisio Computers' ROCE

As we've seen above, Plaisio Computers' returns on capital haven't increased but it is reinvesting in the business. And investors appear hesitant that the trends will pick up because the stock has fallen 18% in the last five years. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

If you want to know some of the risks facing Plaisio Computers we've found 3 warning signs (1 shouldn't be ignored!) that you should be aware of before investing here.

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.

Valuation is complex, but we're helping make it simple.

Find out whether Plaisio Computers is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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