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Returns On Capital Are A Standout For Anglo-Eastern Plantations (LON:AEP)

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at the ROCE trend of Anglo-Eastern Plantations (LON:AEP) we really liked what we saw.

What is 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. To calculate this metric for Anglo-Eastern Plantations, this is the formula:

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

0.23 = US$129m ÷ (US$603m - US$48m) (Based on the trailing twelve months to December 2021).

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So, Anglo-Eastern Plantations has an ROCE of 23%. In absolute terms that's a great return and it's even better than the Food industry average of 9.5%.

View our latest analysis for Anglo-Eastern Plantations

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Historical performance is a great place to start when researching a stock so above you can see the gauge for Anglo-Eastern Plantations' ROCE against it's prior returns. If you're interested in investigating Anglo-Eastern Plantations' past further, check out this free graph of past earnings, revenue and cash flow.

So How Is Anglo-Eastern Plantations' ROCE Trending?

Anglo-Eastern Plantations has not disappointed with their ROCE growth. The figures show that over the last five years, ROCE has grown 102% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

The Bottom Line

To sum it up, Anglo-Eastern Plantations is collecting higher returns from the same amount of capital, and that's impressive. Since the total return from the stock has been almost flat over the last five years, there might be an opportunity here if the valuation looks good. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation on our platform that is definitely worth checking out.

High returns are a key ingredient to strong performance, so check out our free list ofstocks earning high returns on equity with solid balance sheets.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.