ALPHA ADRIATIC d.d (ZGSE:ULPL) Is Looking To Continue Growing Its Returns On Capital

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in ALPHA ADRIATIC d.d's (ZGSE:ULPL) returns on capital, so let's have a look.

We've discovered 4 warning signs about ALPHA ADRIATIC d.d. View them for free.

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 ALPHA ADRIATIC d.d, this is the formula:

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

0.16 = €8.1m ÷ (€76m - €27m) (Based on the trailing twelve months to December 2024).

Therefore, ALPHA ADRIATIC d.d has an ROCE of 16%. In absolute terms, that's a satisfactory return, but compared to the Infrastructure industry average of 11% it's much better.

See our latest analysis for ALPHA ADRIATIC d.d

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 , check out these free graphs detailing revenue and cash flow performance of ALPHA ADRIATIC d.d.

What The Trend Of ROCE Can Tell Us

Investors would be pleased with what's happening at ALPHA ADRIATIC d.d. The data shows that returns on capital have increased substantially over the last four years to 16%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 85%. So we're very much inspired by what we're seeing at ALPHA ADRIATIC d.d thanks to its ability to profitably reinvest capital.

One more thing to note, ALPHA ADRIATIC d.d has decreased current liabilities to 36% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance.

The Bottom Line

All in all, it's terrific to see that ALPHA ADRIATIC d.d is reaping the rewards from prior investments and is growing its capital base. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if ALPHA ADRIATIC d.d can keep these trends up, it could have a bright future ahead.

Like most companies, ALPHA ADRIATIC d.d does come with some risks, and we've found 4 warning signs that you should be aware of.

While ALPHA ADRIATIC d.d 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.