Yahoo Finance What Do The Returns At Altyn (LON:ALTN) Mean Going Forward?
There are a few key trends to look for if we want to identify the next 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 on that note, Altyn (LON:ALTN) looks quite promising in regards to its trends of return on capital.
Return On Capital Employed (ROCE): What is it?
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. Analysts use this formula to calculate it for Altyn:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.049 = US$3.1m ÷ (US$76m - US$13m) (Based on the trailing twelve months to June 2020).
Thus, Altyn has an ROCE of 4.9%. Ultimately, that's a low return and it under-performs the Metals and Mining industry average of 11%.
Check out our latest analysis for Altyn
Historical performance is a great place to start when researching a stock so above you can see the gauge for Altyn's ROCE against it's prior returns. If you're interested in investigating Altyn's past further, check out this free graph of past earnings, revenue and cash flow.
How Are Returns Trending?
It's great to see that Altyn has started to generate some pre-tax earnings from prior investments. The company was generating losses five years ago, but now it's turned around, earning 4.9% which is no doubt a relief for some early shareholders. At first glance, it seems the business is getting more proficient at generating returns, because over the same period, the amount of capital employed has reduced by 30%. The reduction could indicate that the company is selling some assets, and considering returns are up, they appear to be selling the right ones.
The Bottom Line On Altyn's ROCE
In summary, it's great to see that Altyn has been able to turn things around and earn higher returns on lower amounts of capital. And given the stock has remained rather flat over the last five years, there might be an opportunity here if other metrics are strong. With that in mind, we believe the promising trends warrant this stock for further investigation.
One final note, you should learn about the 5 warning signs we've spotted with Altyn (including 2 which is are concerning) .
If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.
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. 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.
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