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# A Close Look At Antevenio, S.A.’s (EPA:ALANT) 16% ROCE

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Today we'll look at Antevenio, S.A. (EPA:ALANT) and reflect on its potential as an investment. To be precise, we'll consider its Return On Capital Employed (ROCE), as that will inform our view of the quality of the business.

First of all, we'll work out how to calculate ROCE. Next, we'll compare it to others in its industry. Last but not least, we'll look at what impact its current liabilities have on its ROCE.

### Understanding Return On Capital Employed (ROCE)

ROCE measures the amount of pre-tax profits a company can generate from the capital employed in its business. In general, businesses with a higher ROCE are usually better quality. Ultimately, it is a useful but imperfect metric. Author Edwin Whiting says to be careful when comparing the ROCE of different businesses, since 'No two businesses are exactly alike.'

### How Do You Calculate Return On Capital Employed?

The formula for calculating the return on capital employed is:

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

Or for Antevenio:

0.16 = €3.0m ÷ (€28m - €8.7m) (Based on the trailing twelve months to December 2018.)

So, Antevenio has an ROCE of 16%.

### Is Antevenio's ROCE Good?

ROCE can be useful when making comparisons, such as between similar companies. Antevenio's ROCE appears to be substantially greater than the 9.3% average in the Media industry. We consider this a positive sign, because it suggests it uses capital more efficiently than similar companies. Regardless of where Antevenio sits next to its industry, its ROCE in absolute terms appears satisfactory, and this company could be worth a closer look.

Our data shows that Antevenio currently has an ROCE of 16%, compared to its ROCE of 11% 3 years ago. This makes us wonder if the company is improving.

Remember that this metric is backwards looking - it shows what has happened in the past, and does not accurately predict the future. ROCE can be misleading for companies in cyclical industries, with returns looking impressive during the boom times, but very weak during the busts. ROCE is, after all, simply a snap shot of a single year. Since the future is so important for investors, you should check out our free report on analyst forecasts for Antevenio.

### What Are Current Liabilities, And How Do They Affect Antevenio's ROCE?

Liabilities, such as supplier bills and bank overdrafts, are referred to as current liabilities if they need to be paid within 12 months. Due to the way ROCE is calculated, a high level of current liabilities makes a company look as though it has less capital employed, and thus can (sometimes unfairly) boost the ROCE. To counter this, investors can check if a company has high current liabilities relative to total assets.

Antevenio has total assets of €28m and current liabilities of €8.7m. Therefore its current liabilities are equivalent to approximately 31% of its total assets. Antevenio has a medium level of current liabilities, which would boost the ROCE.

### Our Take On Antevenio's ROCE

While its ROCE looks good, it's worth remembering that the current liabilities are making the business look better. Antevenio shapes up well under this analysis, but it is far from the only business delivering excellent numbers . You might also want to check this free collection of companies delivering excellent earnings growth.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.