Altitude Group’s Return on Capital Employed (ROCE) has shown promising trends, although it falls behind the average in the software industry. ROCE is a metric used to evaluate the pre-tax income a company earns on the capital invested in its business. Altitude Group’s ROCE currently stands at 3.1%, which is lower than the software industry average of 9.3%.
However, despite the lower return, Altitude Group’s improving profitability is a positive sign. The company has transitioned from being loss-making five years ago to generating a profit of 3.1% on its capital. Furthermore, Altitude Group has seen an 86% increase in the capital employed compared to five years ago, indicating opportunities for further investment and potential growth.
Despite a 52% decline in the stock price over the past five years, the successful reinvestment activities and profitability of Altitude Group suggest a potential opportunity for investors. The company’s ability to reinvest earnings back into the business and generate higher returns aligns with the characteristics of a multi-bagger investment.
While Altitude Group’s ROCE may not be the highest in the industry, it is worth investigating further due to the positive trends and profitability achieved. Interested investors can assess the potential risks facing the company by exploring the two warning signs highlighted.
Overall, Altitude Group’s ROCE shows promising trends and its emphasis on reinvestment and generating profits is noteworthy. Considering the company’s transformation from loss-making to profitability, it presents an interesting opportunity for investors to delve deeper and evaluate its future prospects.
