Slowing Rates Of Return At Metalac a.d. Gornji Milanovac (BELEX:MTLC) Leave Little Room For Excitement

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, the ROCE of Metalac a.d. Gornji Milanovac (BELEX:MTLC) looks decent, right now, so lets see what the trend of returns can tell us.

What Is Return On Capital Employed (ROCE)?

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. To calculate this metric for Metalac a.d. Gornji Milanovac, this is the formula:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.11 = дин791m ÷ (дин11b - дин3.5b) (Based on the trailing twelve months to June 2023).

Thus, Metalac a.d. Gornji Milanovac has an ROCE of 11%. That's a relatively normal return on capital, and it's around the 10% generated by the Consumer Durables industry.

View our latest analysis for Metalac a.d. Gornji Milanovac

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating Metalac a.d. Gornji Milanovac's past further, check out this free graph of past earnings, revenue and cash flow.

What Can We Tell From Metalac a.d. Gornji Milanovac's ROCE Trend?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has employed 24% more capital in the last five years, and the returns on that capital have remained stable at 11%. 11% is a pretty standard return, and it provides some comfort knowing that Metalac a.d. Gornji Milanovac has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

The Key Takeaway

In the end, Metalac a.d. Gornji Milanovac has proven its ability to adequately reinvest capital at good rates of return. Yet over the last five years the stock has declined 31%, so the decline might provide an opening. For that reason, savvy investors might want to look further into this company in case it's a prime investment.

On a separate note, we've found 2 warning signs for Metalac a.d. Gornji Milanovac you'll probably want to know about.

While Metalac a.d. Gornji Milanovac 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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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.