Will Agroliga Group (WSE:AGL) Repeat Its Return Growth Of The Past?

To find a multi-bagger stock, what are the underlying trends we should look for in a business? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. And in light of that, the trends we're seeing at Agroliga Group's (WSE:AGL) look very promising so lets take a look.

What is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Agroliga Group:

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).

Thus, Agroliga Group has an ROCE of 25%. That's a fantastic return and not only that, it outpaces the average of 11% earned by companies in a similar industry.

See 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're interested in investigating Agroliga Group's past further, check out this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For Agroliga Group Tell Us?

The trends we've noticed at Agroliga Group are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably 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

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Agroliga Group has. Since the stock has returned a staggering 305% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you want to continue researching Agroliga Group, you might be interested to know about the 5 warning signs that our analysis has discovered.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

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