If you want to identify your next multibagger, there are some important trends to look out for. In particular, I would like to look at two things.First, grow return The first is capital employed (ROCE) and the second is the company's capital growth. amount of capital employed. After all, this shows that this is a business that is increasing its profitability and reinvesting its profits.So, in the meantime african media entertainment (JSE:AME) currently has a high ROCE. Let's take a look at what we can learn from how earnings have changed.
What is return on capital employed (ROCE)?
In case you aren't familiar, ROCE is a metric that measures how much pre-tax profit (as a percentage) a company earns on the capital invested in its business. Analysts use the following formula to calculate African Media Entertainment's earnings.
Return on Capital Employed = Earnings before interest and tax (EBIT) ÷ (Total assets – Current liabilities)
0.20 = R52m ÷ (R339m – R77m) (Based on the previous 12 months to September 2023).
therefore, African Media Entertainment's ROCE is 20%. In absolute terms, this is a significant gain, even better than the media industry average of 11%.
Check out our latest analysis for African Media Entertainment.
Although the past does not represent the future, it can be helpful to know how a company has performed historically. That's why I created this graph above. If you would like to see how African Media Entertainment has performed in the past on other metrics, you can view this. free A graph of African Media Entertainment's historical earnings, revenue and cash flow.
What ROCE trends tell us
There is not much to report about African Media Entertainment's profits and its capitalization level, as both metrics have remained stable over the past five years. Companies with these characteristics tend to be mature and have stable management because they have passed the growth stage. So, while the current business is profitable, it's hard to believe it will become a multibagger going forward unless its use of capital increases.
The conclusion is…
It has allocated capital efficiently to generate impressive returns, but has not strengthened its capital base as seen from multibaggers. Unsurprisingly, the stock price has only risen 21% over the past five years, but this could indicate that investors are considering future gains. Therefore, if you are looking for a multibagger, you may want to consider other options.
African Media Entertainment recognizes some risks 4 warning signs (and two slightly unpleasant ones) that I think you should know about.
If you want to see other companies making high profits, check us out. free Here is a list of companies with strong balance sheets and high profits.
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