Anglo-Eastern Plantations (LON:AEP) Has More To Do To Multiply In Value Going Forward
Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So, when we ran our eye over Anglo-Eastern Plantations' (LON:AEP) trend of ROCE, we liked what we saw.
Understanding 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 Anglo-Eastern Plantations is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.11 = US$69m ÷ (US$662m - US$43m) (Based on the trailing twelve months to June 2023).
Therefore, Anglo-Eastern Plantations has an ROCE of 11%. In absolute terms, that's a satisfactory return, but compared to the Food industry average of 8.8% it's much better.
See our latest analysis for Anglo-Eastern Plantations
Historical performance is a great place to start when researching a stock so above you can see the gauge for Anglo-Eastern Plantations' ROCE against it's prior returns. If you'd like to look at how Anglo-Eastern Plantations 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 Anglo-Eastern Plantations Tell Us?
The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has consistently earned 11% for the last five years, and the capital employed within the business has risen 22% in that time. 11% is a pretty standard return, and it provides some comfort knowing that Anglo-Eastern Plantations has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.
What We Can Learn From Anglo-Eastern Plantations' ROCE
To sum it up, Anglo-Eastern Plantations has simply been reinvesting capital steadily, at those decent rates of return. In light of this, the stock has only gained 25% over the last five years for shareholders who have owned the stock in this period. So to determine if Anglo-Eastern Plantations is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.
One more thing, we've spotted 2 warning signs facing Anglo-Eastern Plantations that you might find interesting.
While Anglo-Eastern Plantations isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
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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.
