In This Article:
If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after investigating Almunda Professionals (AMS:AMUND), we don't think it's current trends fit the mold of a multi-bagger.
What Is Return On Capital Employed (ROCE)?
For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Almunda Professionals, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.049 = €1.3m ÷ (€38m - €10m) (Based on the trailing twelve months to December 2024).
Thus, Almunda Professionals has an ROCE of 4.9%. Ultimately, that's a low return and it under-performs the Commercial Services industry average of 11%.
See our latest analysis for Almunda Professionals
Historical performance is a great place to start when researching a stock so above you can see the gauge for Almunda Professionals' ROCE against it's prior returns. If you're interested in investigating Almunda Professionals' past further, check out this free graph covering Almunda Professionals' past earnings, revenue and cash flow.
How Are Returns Trending?
In terms of Almunda Professionals' historical ROCE movements, the trend isn't fantastic. Over the last five years, returns on capital have decreased to 4.9% from 13% five years ago. Meanwhile, the business is utilizing more capital but this hasn't moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It may take some time before the company starts to see any change in earnings from these investments.
In Conclusion...
Bringing it all together, while we're somewhat encouraged by Almunda Professionals' reinvestment in its own business, we're aware that returns are shrinking. Since the stock has gained an impressive 42% over the last five years, investors must think there's better things to come. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.