Yahoo Finance Returns At Advent-AWI Holdings (CVE:AWI) Appear To Be Weighed Down
Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. In light of that, when we looked at Advent-AWI Holdings (CVE:AWI) and its ROCE trend, we weren't exactly thrilled.
Return On Capital Employed (ROCE): What Is It?
Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Advent-AWI Holdings:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.012 = CA$178k ÷ (CA$16m - CA$1.5m) (Based on the trailing twelve months to June 2023).
Therefore, Advent-AWI Holdings has an ROCE of 1.2%. Ultimately, that's a low return and it under-performs the Specialty Retail industry average of 14%.
See our latest analysis for Advent-AWI Holdings
While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings, revenue and cash flow of Advent-AWI Holdings, check out these free graphs here.
How Are Returns Trending?
Over the past five years, Advent-AWI Holdings' ROCE and capital employed have both remained mostly flat. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So don't be surprised if Advent-AWI Holdings doesn't end up being a multi-bagger in a few years time.
Our Take On Advent-AWI Holdings' ROCE
In a nutshell, Advent-AWI Holdings has been trudging along with the same returns from the same amount of capital over the last five years. And investors may be recognizing these trends since the stock has only returned a total of 34% to shareholders over the last five years. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.
Advent-AWI Holdings does have some risks, we noticed 6 warning signs (and 3 which are concerning) we think you should know about.
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.
