Arctic Fish Holding (OB:AFISH) Shareholders Will Want The ROCE Trajectory To Continue

There are a few key trends to look for if we want to identify the next multi-bagger. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Speaking of which, we noticed some great changes in Arctic Fish Holding's (OB:AFISH) returns on capital, so let's have a look.

What is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Arctic Fish Holding:

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

0.04 = kr51m ÷ (kr1.4b - kr175m) (Based on the trailing twelve months to March 2022).

Thus, Arctic Fish Holding has an ROCE of 4.0%. Ultimately, that's a low return and it under-performs the Food industry average of 11%.

View our latest analysis for Arctic Fish Holding

In the above chart we have measured Arctic Fish Holding's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

What Does the ROCE Trend For Arctic Fish Holding Tell Us?

Arctic Fish Holding has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses five years ago, but now it's earning 4.0% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, Arctic Fish Holding is utilizing 207% more capital than it was five years ago. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

The Key Takeaway

To the delight of most shareholders, Arctic Fish Holding has now broken into profitability. Since the stock has returned a solid 69% to shareholders over the last year, it's fair to say investors are beginning to recognize these changes. 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.

While Arctic Fish Holding looks impressive, no company is worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether AFISH is currently trading for a fair price.

While Arctic Fish Holding isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.