June 14, 2022

Returns are gaining momentum at Trilogiq (EPA:ALTRI)

What trends should we look for if we want to identify stocks that can multiply in value over the long term? First, we’ll want to see proof to return to on capital employed (ROCE) which is increasing, and on the other hand, a base capital employed. Simply put, these types of businesses are slot machines, meaning they continually reinvest their profits at ever-higher rates of return. Speaking of which, we’ve noticed big changes in Trilogiq’s (EPA:ALTRI) returns on capital, so let’s take a look.

Understanding return on capital employed (ROCE)

For those who don’t know what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital used in its business. The formula for this calculation on Trilogiq is:

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

0.024 = €863k ÷ (€40M – €3.6M) (Based on the last twelve months to September 2021).

So, Trilogiq posted a ROCE of 2.4%. In absolute terms, this is a low yield and it is also below the machine industry average of 5.6%.

See our latest analysis for Trilogiq

ENXTPA: ALTRI Return on Capital Employed May 25, 2022

Although the past is not indicative of the future, it can be useful to know the historical performance of a company, which is why we have this graph above. If you want to investigate more about Trilogiq’s past, check out this free chart of past profits, revenue and cash flow.

What can we say about the ROCE trend of Trilogiq?

It’s great to see that Trilogiq has started to generate pre-tax profits from previous investments. The company was generating losses five years ago, but now it has recovered, gaining 2.4%, which is undoubtedly a relief for some early shareholders. In terms of capital employed, Trilogiq is using 36% less capital than five years ago, which at first glance may indicate that the business has become more efficient in generating these returns. The reduction could indicate that the company is selling some assets and, given the rise in yields, it appears to be selling the good ones.

The basics of Trilogiq’s ROCE

From what we have seen above, Trilogiq has managed to increase its return on capital while reducing its capital base. Given that the stock is down 43% in the last five years, it could be a good investment if the valuation and other metrics are also attractive. That said, research into the company’s current valuation metrics and future prospects seems appropriate.

One more thing we spotted 2 warning signs against Trilogiq that might be of interest to you.

For those who like to invest in solid companies, look at this free list of companies with strong balance sheets and high returns on equity.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.