Returns On Capital Are Showing Encouraging Signs At S.C. Casa Alba - Independenta (BVB:CAIN)

What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. With that in mind, we've noticed some promising trends at S.C. Casa Alba - Independenta (BVB:CAIN) so let's look a bit deeper.

We've discovered 3 warning signs about S.C. Casa Alba - Independenta. View them for free.

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. To calculate this metric for S.C. Casa Alba - Independenta, this is the formula:

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

0.018 = RON3.0m ÷ (RON161m - RON1.2m) (Based on the trailing twelve months to December 2024).

Thus, S.C. Casa Alba - Independenta has an ROCE of 1.8%. In absolute terms, that's a low return and it also under-performs the Machinery industry average of 6.9%.

View our latest analysis for S.C. Casa Alba - Independenta

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're interested in investigating S.C. Casa Alba - Independenta's past further, check out this free graph covering S.C. Casa Alba - Independenta's past earnings, revenue and cash flow.

So How Is S.C. Casa Alba - Independenta's ROCE Trending?

Shareholders will be relieved that S.C. Casa Alba - Independenta has broken into profitability. While the business was unprofitable in the past, it's now turned things around and is earning 1.8% on its capital. Interestingly, the capital employed by the business has remained relatively flat, so these higher returns are either from prior investments paying off or increased efficiencies. With no noticeable increase in capital employed, it's worth knowing what the company plans on doing going forward in regards to reinvesting and growing the business. Because in the end, a business can only get so efficient.

What We Can Learn From S.C. Casa Alba - Independenta's ROCE

As discussed above, S.C. Casa Alba - Independenta appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. Investors may not be impressed by the favorable underlying trends yet because over the last year the stock has only returned 1.1% to shareholders. So with that in mind, we think the stock deserves further research.

One final note, you should learn about the 3 warning signs we've spotted with S.C. Casa Alba - Independenta (including 2 which can't be ignored) .

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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.