Yahoo Finance All for One Group (ETR:A1OS) Will Be Hoping To Turn Its Returns On Capital Around
To find a multi-bagger stock, what are the underlying trends we should look for in a business? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. However, after briefly looking over the numbers, we don't think All for One Group (ETR:A1OS) has the makings of a multi-bagger going forward, but let's have a look at why that may be.
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. Analysts use this formula to calculate it for All for One Group:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.087 = €20m ÷ (€345m - €116m) (Based on the trailing twelve months to December 2023).
So, All for One Group has an ROCE of 8.7%. Even though it's in line with the industry average of 9.3%, it's still a low return by itself.
View our latest analysis for All for One Group
Above you can see how the current ROCE for All for One Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for All for One Group .
What Can We Tell From All for One Group's ROCE Trend?
When we looked at the ROCE trend at All for One Group, we didn't gain much confidence. Around five years ago the returns on capital were 14%, but since then they've fallen to 8.7%. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.
Our Take On All for One Group's ROCE
While returns have fallen for All for One Group in recent times, we're encouraged to see that sales are growing and that the business is reinvesting in its operations. In light of this, the stock has only gained 19% over the last five years. Therefore we'd recommend looking further into this stock to confirm if it has the makings of a good investment.
If you'd like to know about the risks facing All for One Group, we've discovered 1 warning sign that you should be aware of.
While All for One Group may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.
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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.
