Andrew Peller (TSE:ADW.A) Is Reinvesting At Lower Rates Of Return

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16-04-2025

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after briefly looking over the numbers, we don't think Andrew Peller (TSE:ADW.A) has the makings of a multi-bagger going forward, but let's have a look at why that may be.
We've discovered 4 warning signs about Andrew Peller. View them for free.
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. The formula for this calculation on Andrew Peller is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.054 = CA$26m ÷ (CA$541m - CA$68m) (Based on the trailing twelve months to December 2024).
Therefore, Andrew Peller has an ROCE of 5.4%. Ultimately, that's a low return and it under-performs the Beverage industry average of 15%.
View our latest analysis for Andrew Peller
In the above chart we have measured Andrew Peller's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Andrew Peller .
In terms of Andrew Peller's historical ROCE movements, the trend isn't fantastic. To be more specific, ROCE has fallen from 11% over the last five years. On the other hand, the company has been employing more capital without a corresponding improvement in sales in the last year, which could suggest these investments are longer term plays. It may take some time before the company starts to see any change in earnings from these investments.
To conclude, we've found that Andrew Peller is reinvesting in the business, but returns have been falling. And in the last five years, the stock has given away 33% so the market doesn't look too hopeful on these trends strengthening any time soon. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.
On a final note, we found 4 warning signs for Andrew Peller (2 can't be ignored) you should be aware of.
While Andrew Peller may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.
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