Should You Be Excited About Agroliga Group's (WSE:AGL) Returns On Capital?

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in Agroliga Group's (WSE:AGL) returns on capital, so let's have a look.

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. The formula for this calculation on Agroliga Group is:

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

0.25 = €12m ÷ (€67m - €22m) (Based on the trailing twelve months to September 2020).

Therefore, Agroliga Group has an ROCE of 25%. That's a fantastic return and not only that, it outpaces the average of 9.5% earned by companies in a similar industry.

View our latest analysis for Agroliga Group

Historical performance is a great place to start when researching a stock so above you can see the gauge for Agroliga Group's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Agroliga Group, check out these free graphs here.

The Trend Of ROCE

Investors would be pleased with what's happening at Agroliga Group. The data shows that returns on capital have increased substantially over the last five years to 25%. The amount of capital employed has increased too, by 365%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

Our Take On Agroliga Group's ROCE

All in all, it's terrific to see that Agroliga Group is reaping the rewards from prior investments and is growing its capital base. And a remarkable 413% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

One more thing, we've spotted 5 warning signs facing Agroliga Group that you might find interesting.

Agroliga Group is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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This article by Simply Wall St is general in nature. 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.
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