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華爾街日報Agroliga Group (WSE:AGL) Will Be Looking To Turn Around Its Returns
When we're researching a company, it's sometimes hard to find the warning signs, but there are some financial metrics that can help spot trouble early. A business that's potentially in decline often shows two trends, a return on capital employed (ROCE) that's declining, and a base of capital employed that's also declining. This indicates to us that the business is not only shrinking the size of its net assets, but its returns are falling as well. So after we looked into Agroliga Group (WSE:AGL), the trends above didn't look too great.
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. Analysts use this formula to calculate it for Agroliga Group:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.00045 = €15k ÷ (€52m - €19m) (Based on the trailing twelve months to March 2025).
Therefore, Agroliga Group has an ROCE of 0.05%. Ultimately, that's a low return and it under-performs the Food industry average of 12%.
View our latest analysis for Agroliga Group
Historical performance is a great place to start when researching a stock so above you can see the gauge for Agroliga Group's ROCE against it's prior returns. If you're interested in investigating Agroliga Group's past further, check out this free graph covering Agroliga Group's past earnings, revenue and cash flow.
What Can We Tell From Agroliga Group's ROCE Trend?
In terms of Agroliga Group's historical ROCE movements, the trend doesn't inspire confidence. To be more specific, the ROCE was 18% five years ago, but since then it has dropped noticeably. And on the capital employed front, the business is utilizing roughly the same amount of capital as it was back then. This combination can be indicative of a mature business that still has areas to deploy capital, but the returns received aren't as high due potentially to new competition or smaller margins. If these trends continue, we wouldn't expect Agroliga Group to turn into a multi-bagger.
On a related note, Agroliga Group has decreased its current liabilities to 36% of total assets. That could partly explain why the ROCE has dropped. What's more, this can reduce some aspects of risk to the business because now the company's suppliers or short-term creditors are funding less of its operations. Some would claim this reduces the business' efficiency at generating ROCE since it is now funding more of the operations with its own money.
Our Take On Agroliga Group's ROCE
In summary, it's unfortunate that Agroliga Group is generating lower returns from the same amount of capital. It should come as no surprise then that the stock has fallen 62% over the last five years, so it looks like investors are recognizing these changes. That being the case, unless the underlying trends revert to a more positive trajectory, we'd consider looking elsewhere.
If you'd like to know more about Agroliga Group, we've spotted 4 warning signs, and 2 of them 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.
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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.