Returns At Foodlink A.E (ATH:FOODL) Are On The Way Up

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. So on that note, Foodlink A.E (ATH:FOODL) looks quite promising in regards to its trends of return on capital.

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What Is 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 Foodlink A.E, this is the formula:

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

0.14 = €3.3m ÷ (€67m - €45m) (Based on the trailing twelve months to June 2025).

Therefore, Foodlink A.E has an ROCE of 14%. That's a relatively normal return on capital, and it's around the 13% generated by the Logistics industry.

See our latest analysis for Foodlink A.E

Historical performance is a great place to start when researching a stock so above you can see the gauge for Foodlink A.E's ROCE against it's prior returns. If you'd like to look at how Foodlink A.E has performed in the past in other metrics, you can view this free graph of Foodlink A.E's past earnings, revenue and cash flow.

How Are Returns Trending?

The fact that Foodlink A.E is now generating some pre-tax profits from its prior investments is very encouraging. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 14% on its capital. Not only that, but the company is utilizing 74% more capital than before, but that's to be expected from a company trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

Another thing to note, Foodlink A.E has a high ratio of current liabilities to total assets of 66%. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

The Key Takeaway

In summary, it's great to see that Foodlink A.E has managed to break into profitability and is continuing to reinvest in its business. And a remarkable 223% total return over the last five years tells us that investors are expecting more good things to come in the future. 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 4 warning signs for Foodlink A.E (of which 2 are significant!) that you should know about.

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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.