AGL Energy (ASX:AGL) Experiences a Slowdown in Returns on Capital

April 13, 2025 10:31 AM AEST | By Team Kalkine Media

Google News:

AGL Energy (ASX:AGL) Experiences a Slowdown in Returns on Capital — Image source: Shutterstock

Recent News

Southwire’s Project GIFT® Supports Water Mission With Annual Walk for...

London-listed Spectris soars 20% on fresh takeover interest from Adven...

Insurance tech firm Slide targets over $2 billion valuation in Nasdaq...

Macro strategist explains why it’s a good time to own Russell 2000

Highlights

AGL Energy's ROCE shows no notable improvement trend.

The company exhibits a stable, mature business profile.

Investment opportunities are limited, impacting growth prospects.

Investors seeking potential multi-bagger stocks need to identify businesses with increasing returns on capital employed (ROCE) and expanding capital bases. This approach focuses on companies that reinvest profits at progressively higher returns. However, AGL Energy (ASX:AGL) presents a different scenario in its ROCE analysis.

ROCE is a crucial metric used to measure a company's efficiency in generating pre-tax profits from its employed capital. For AGL Energy, the formula for calculating this stands at:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
It results in 12% ROCE for AGL Energy, notably higher than the 5.3% average in the Integrated Utilities industry.

When we consider AGL Energy's capital trends over the past five years, both its ROCE and capital employed have been relatively stable. This pattern is typical for mature companies that have surpassed aggressive reinvestment phases and now distribute a good portion of earnings back to shareholders. AGL Energy, for instance, returns around 54% of its earnings.

Despite the consistency, AGL Energy's stock has seen a 24% decline over five years, suggesting investor doubts about improvement in underlying trends. Therefore, current observations indicate that AGL Energy might not meet the criteria for a multi-bagger, given the limited investment prospect landscape and stable business model.

For investors interested in understanding more about AGL Energy or exploring other companies with robust balance sheets and high returns on equity, additional insights can be gathered from recent analysis reports. As always, diversification and thorough research are key strategies for navigating the stock market landscape.

Disclaimer

The content, including but not limited to any articles, news, quotes, information, data, text, reports, ratings, opinions, images, photos, graphics, graphs, charts, animations and video (Content) is a service of Kalkine Media Pty Ltd (Kalkine Media, we or us), ACN 629 651 672 and is available for personal and non-commercial use only. The principal purpose of the Content is to educate and inform. The Content does not contain or imply any recommendation or opinion intended to influence your financial decisions and must not be relied upon by you as such. Some of the Content on this website may be sponsored/non-sponsored, as applicable, but is NOT a solicitation or recommendation to buy, sell or hold the stocks of the company(s) or engage in any investment activity under discussion. Kalkine Media is neither licensed nor qualified to provide investment advice through this platform. Users should make their own enquiries about any investments and Kalkine Media strongly suggests the users to seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice), as necessary. Kalkine Media hereby disclaims any and all the liabilities to any user for any direct, indirect, implied, punitive, special, incidental or other consequential damages arising from any use of the Content on this website, which is provided without warranties. The views expressed in the Content by the guests, if any, are their own and do not necessarily represent the views or opinions of Kalkine Media. Some of the images/music that may be used on this website are copyright to their respective owner(s). Kalkine Media does not claim ownership of any of the pictures displayed/music used on this website unless stated otherwise. The images/music that may be used on this website are taken from various sources on the internet, including paid subscriptions or are believed to be in public domain. We have used reasonable efforts to accredit the source wherever it was indicated as or found to be necessary.