Shareholders Would Enjoy A Repeat Of Airtel Africa's (LON:AAF) Recent Growth In Returns
Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, the ROCE of Airtel Africa (LON:AAF) looks great, so lets see what the trend can tell us.
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. The formula for this calculation on Airtel Africa is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.21 = US$1.7b ÷ (US$13b - US$4.5b) (Based on the trailing twelve months to September 2025).
Therefore, Airtel Africa has an ROCE of 21%. That's a fantastic return and not only that, it outpaces the average of 8.5% earned by companies in a similar industry.
View our latest analysis for Airtel Africa
Above you can see how the current ROCE for Airtel Africa compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Airtel Africa for free.
What Does the ROCE Trend For Airtel Africa Tell Us?
The trends we've noticed at Airtel Africa are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 21%. The amount of capital employed has increased too, by 31%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.
What We Can Learn From Airtel Africa's ROCE
All in all, it's terrific to see that Airtel Africa is reaping the rewards from prior investments and is growing its capital base. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. Therefore, we think it would be worth your time to check if these trends are going to continue.
One more thing to note, we've identified 1 warning sign with Airtel Africa and understanding this should be part of your investment process.
If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.
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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.