If you’re looking for a multi-bagger, there are a few things to watch out for. A common approach is to try to find a company with Return on capital employed (ROCE) which is increasing, in line with growth amount capital employed. Basically, this means that a company has profitable initiatives that it can continue to reinvest in, which is a hallmark of a blending machine. With this in mind, the ROCE of ASTARTA Holding (WSE:AST) looks attractive right now, so let’s see what the yield trend can tell us.
Understanding return on capital employed (ROCE)
For those unaware, ROCE is a measure of a company’s annual pre-tax profit (yield), relative to the capital employed in the business. The formula for this calculation on ASTARTA Holding is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)
0.26 = ₴4.9b ÷ (₴22b – ₴2.8b) (Based on the last twelve months to March 2022).
Therefore, ASTARTA Holding has a ROCE of 26%. In absolute terms, this is an excellent return and is even better than the food industry average of 14%.
Check out our latest analysis for ASTARTA Holding
Above, you can see how ASTARTA Holding’s current ROCE compares to its past returns on capital, but you can’t say anything about the past. If you’re interested, you can check out analyst forecasts in our free analyst forecast report for the company.
The ROCE trend
It’s hard not to be impressed with ASTARTA Holding’s returns on capital. Over the past five years, ROCE has remained relatively stable at around 26% and the company has deployed 49% more capital into its operations. Such returns are the envy of most companies and given that they have repeatedly reinvested at these rates, even better. If these trends can continue, we wouldn’t be surprised if the company went multi-bagger.
What we can learn from ASTARTA Holding’s ROCE
Ultimately, the company has proven that it can reinvest its capital at high rates of return, which you’ll recall is a trait of a multi-bagger. Still, over the past five years, the stock is down 67%, so the drop could provide an opening. Therefore we think it would be worth taking this stock further given that the fundamentals are attractive.
On a separate note, we found 3 warning signs for ASTARTA Holding you will probably want to know more.
If you want to find more stocks that have generated high returns, check out this free list of stocks with strong balance sheets that also generate high returns on equity.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.
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