Returns On Capital At Atomenergoremont (BUL:ATOM) Paint A Concerning Picture

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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Having said that, from a first glance at Atomenergoremont (BUL:ATOM) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

What is 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. To calculate this metric for Atomenergoremont, this is the formula:

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

0.056 = лв8.7m ÷ (лв172m - лв16m) (Based on the trailing twelve months to December 2020).

Therefore, Atomenergoremont has an ROCE of 5.6%. Ultimately, that's a low return and it under-performs the Commercial Services industry average of 9.5%.

Check out our latest analysis for Atomenergoremont

Historical performance is a great place to start when researching a stock so above you can see the gauge for Atomenergoremont's ROCE against it's prior returns. If you're interested in investigating Atomenergoremont's past further, check out this free graph of past earnings, revenue and cash flow.

What Can We Tell From Atomenergoremont's ROCE Trend?

When we looked at the ROCE trend at Atomenergoremont, we didn't gain much confidence. To be more specific, ROCE has fallen from 23% over the last five years. Given the business is employing more capital while revenue has slipped, this is a bit concerning. This could mean that the business is losing its competitive advantage or market share, because while more money is being put into ventures, it's actually producing a lower return - "less bang for their buck" per se.

In Conclusion...

We're a bit apprehensive about Atomenergoremont because despite more capital being deployed in the business, returns on that capital and sales have both fallen. Despite the concerning underlying trends, the stock has actually gained 8.6% over the last three years, so it might be that the investors are expecting the trends to reverse. Either way, we aren't huge fans of the current trends and so with that we think you might find better investments elsewhere.

Atomenergoremont does have some risks, we noticed 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

While Atomenergoremont 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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