Advertisement
- United States
- /
- Software
- /
- NasdaqGM:APPF
AppFolio (NASDAQ:APPF) Is Achieving High Returns On Its Capital
Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, 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. And in light of that, the trends we're seeing at AppFolio's (NASDAQ:APPF) look very promising so lets take a look.
Understanding Return On Capital Employed (ROCE)
Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on AppFolio is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.27 = US$136m ÷ (US$565m - US$59m) (Based on the trailing twelve months to March 2025).
Thus, AppFolio has an ROCE of 27%. That's a fantastic return and not only that, it outpaces the average of 9.9% earned by companies in a similar industry.
Check out our latest analysis for AppFolio
Above you can see how the current ROCE for AppFolio compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for AppFolio .
So How Is AppFolio's ROCE Trending?
The trends we've noticed at AppFolio are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 27%. The amount of capital employed has increased too, by 99%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.
The Bottom Line
To sum it up, AppFolio has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has only returned 30% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. So with that in mind, we think the stock deserves further research.
On a separate note, we've found 1 warning sign for AppFolio you'll probably want to know about.
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.
New: Manage All Your Stock Portfolios in One Place
We've created the ultimate portfolio companion for stock investors, and it's free.
• Connect an unlimited number of Portfolios and see your total in one currency
• Be alerted to new Warning Signs or Risks via email or mobile
• Track the Fair Value of your stocks
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
About NasdaqGM:APPF
AppFolio
Provides cloud-based platform for the real estate industry in the United States.
Flawless balance sheet with high growth potential.
Similar Companies
Market Insights
Advertisement
Weekly Picks
JO
Jolt_Communications on Myseum ·
The Future of Social Sharing Is Private and People Are Ready
Fair Value:US$7.9577.1% undervalued
19 followersusers have followed this narrative
0 commentsusers have commented on this narrative
0 likesusers have liked this narrative
TO
Tokyo on ASML Holding ·
EU#3 - From Philips Management Buyout to Europe’s Biggest Company
Fair Value:€1.31k7.1% undervalued
27 followersusers have followed this narrative
2 commentsusers have commented on this narrative
11 likesusers have liked this narrative
YI
yiannisz on Booking Holdings ·
Booking Holdings: Why Ground-Level Travel Trends Still Favor the Platform Giants
Fair Value:US$5.47k8.5% undervalued
6 followersusers have followed this narrative
0 commentsusers have commented on this narrative
4 likesusers have liked this narrative
CO
composite32 on Shell ·
A fully integrated LNG business seems to be ignored by the market.
Fair Value:UK£36.122.6% undervalued
35 followersusers have followed this narrative
0 commentsusers have commented on this narrative
9 likesusers have liked this narrative
Recently Updated Narratives
BL
BlackGoat on Palantir Technologies ·
Palantir: Redefining Enterprise Software for the AI Era
Fair Value:US$107.0237.0% overvalued
194 followersusers have followed this narrative
6 commentsusers have commented on this narrative
1 likeusers have liked this narrative
AN
andre_santos on Microsoft ·
Microsoft - A Fundamental and Historical Valuation
Fair Value:US$437.171.6% undervalued
18 followersusers have followed this narrative
4 commentsusers have commented on this narrative
0 likesusers have liked this narrative
UN
unknown on Merck ·
The Oncology Anchor: Why Merck’s 46% Discount Defies the Keytruda Cliff
Fair Value:US$201.5645.3% undervalued
1 followerusers have followed this narrative
0 commentsusers have commented on this narrative
0 likesusers have liked this narrative
Popular Narratives
OO
OOO97 on Neo Performance Materials ·
Undervalued Key Player in Magnets/Rare Earth
Fair Value:CA$25.3324.4% undervalued
71 followersusers have followed this narrative
0 commentsusers have commented on this narrative
19 likesusers have liked this narrative
AN
AnalystConsensusTarget on NVIDIA ·
NVDA: Expanding AI Demand Will Drive Major Data Center Investments Through 2026
Fair Value:US$253.0224.5% undervalued
1047 followersusers have followed this narrative
6 commentsusers have commented on this narrative
31 likesusers have liked this narrative
AN
AnalystConsensusTarget on Amazon.com ·
AMZN: Acceleration In Cloud And AI Will Drive Margin Expansion Ahead
Fair Value:US$295.6119.1% undervalued
1342 followersusers have followed this narrative
5 commentsusers have commented on this narrative
11 likesusers have liked this narrative
Trending Discussion
JA
jayhcee on Motorcar Parts of America ·
MPAA often has inventory and core-related timing issues. While this quarter’s problems may ease, similar issues have recurred historically and can persist for several quarters. It's not a one-off, it's a structural part of their business. Core returns are simply estimates: How many customers will actually return the original part; how quickly they'll do so; how many are useable; what they're worth, etc. MPAA predicts X sales in a quarter and Y core returns and its reserves, inventory values, etc. are based on that. If they expect a 90% core return rate and only 80% come back it doesn't change cash but they have to write down inventory and increase cost of goods sold which impacts EPS. They've also cited inventory buildup at key customers multiple times in the past. The assumption the latest backlog will all shift into future quarters this year with no impact on pricing, etc. seems more like wishful thinking. Retailer X was slated to buy $10m in parts this quarter but finds they have a lot more inventory on hand than they anticipated so they pushed the order. Realistically there are likely to be SKU cuts, reduction in safety stock on others, etc. Assuming that all $10m will come in this year plus the regular replenishment seems pretty unrealistic. MPAA also has a shaky track record when it comes to new lines and the supposed impact on business. If you look at the EV testing solutions hype back around 2020 that was supposed to diversify them beyond traditional reman and be a higher margin business that would grow with EV adoption. But it has never turned into a material contributor. The debt reduction and stock buy backs are meaningful but IMHO this narrative takes a very optimistic view of things.
0
|0
US
User on Discovery Silver ·
The problem with your reasoning is, that 37 Moz are AgEq. If you read the FS, you'll find out that annual silver production is more around 14-15 Moz. But at the time of the FS, that 37 Moz AgEq was a number that came of a formula (which is specified in the FS), being a mix of four metals: Ag, Au, Pb and Zc. But now, beginning of 2026, the spotprices of silver and gold have risen so much in comparison to Pb and Zc prices, that you need to recalculate the AgEq number of 37 Moz according to the recent prices. This will result in the fact that silver and gold hold more value in that mix of four metals, and thus dragg the 37 Moz AgEQ number down to somewhere around 18 Moz AgEq. The more valuable silver and gold become, the lower the AgEq number will get, but it'll never get under the yearly average production of silver, which should be somewhere between 14-15 Moz Ag in the first four years. So in short, with this in mind, your fair value is rather around CA$ 50, even with silver at 300 usd an ounce. But a more prudent stockprice forecast is around CA$ 20 and hopefully going toward CA$ 30. So DSV is a top stock, because it's producing actual gold every quarter. But don't put your hopes too high.
0
|0