A2M Strategic Valuation, page-31

RoCE by simply wall street looks impressive now.

May 11 https://finance.yahoo.com/news/under-bonnet-a2-milks-nzse-140200370.html?ltr=1

-If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, the ROCE of a2 Milk (NZSE:ATM) looks great, so lets see what the trend can tell us.

Understanding Return On Capital Employed (ROCE)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 a2 Milk is:Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)0.38 = NZ$458m ÷ (NZ$1.4b - NZ$199m) (Based on the trailing twelve months to December 2020).So, a2 Milk has an ROCE of 38%.

That's a fantastic return and not only that, it outpaces the average of 7.7% earned by companies in a similar industry.