We Like These Underlying Trends At Alumil Rom Industry (BVB:ALU)

There are a few key trends to look for if we want to identify the next multi-bagger. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So on that note, Alumil Rom Industry (BVB:ALU) looks quite promising in regards to its trends of return on capital.

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. To calculate this metric for Alumil Rom Industry, this is the formula:

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

0.062 = RON3.9m ÷ (RON76m - RON14m) (Based on the trailing twelve months to September 2020).

Therefore, Alumil Rom Industry has an ROCE of 6.2%. Ultimately, that's a low return and it under-performs the Metals and Mining industry average of 9.2%.

See our latest analysis for Alumil Rom Industry

Historical performance is a great place to start when researching a stock so above you can see the gauge for Alumil Rom Industry's ROCE against it's prior returns. If you'd like to look at how Alumil Rom Industry has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For Alumil Rom Industry Tell Us?

Alumil Rom Industry has not disappointed with their ROCE growth. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 22% over the last five years. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

The Bottom Line On Alumil Rom Industry's ROCE

In summary, we're delighted to see that Alumil Rom Industry has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And with a respectable 64% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Alumil Rom Industry does have some risks though, and we've spotted 1 warning sign for Alumil Rom Industry that you might be interested in.

While Alumil Rom Industry 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.

When trading Alumil Rom Industry or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.