Returns On Capital At Toplofikatsia-Ruse AD (BUL:TPLR) Have Stalled

There are a few key trends to look for if we want to identify the next multi-bagger. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So, when we ran our eye over Toplofikatsia-Ruse AD's (BUL:TPLR) trend of ROCE, we liked what we saw.

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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 Toplofikatsia-Ruse AD, this is the formula:

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

0.10 = лв21m ÷ (лв393m - лв186m) (Based on the trailing twelve months to March 2025).

So, Toplofikatsia-Ruse AD has an ROCE of 10%. In absolute terms, that's a satisfactory return, but compared to the Electric Utilities industry average of 6.9% it's much better.

See our latest analysis for Toplofikatsia-Ruse AD

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

What Can We Tell From Toplofikatsia-Ruse AD's ROCE Trend?

While the current returns on capital are decent, they haven't changed much. Over the past five years, ROCE has remained relatively flat at around 10% and the business has deployed 130% more capital into its operations. Since 10% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

One more thing to note, even though ROCE has remained relatively flat over the last five years, the reduction in current liabilities to 47% of total assets, is good to see from a business owner's perspective. This can eliminate some of the risks inherent in the operations because the business has less outstanding obligations to their suppliers and or short-term creditors than they did previously. We'd like to see this trend continue though because as it stands today, thats still a pretty high level.

The Key Takeaway

To sum it up, Toplofikatsia-Ruse AD has simply been reinvesting capital steadily, at those decent rates of return. And long term investors would be thrilled with the 151% return they've received over the last three years. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

Toplofikatsia-Ruse AD does have some risks though, and we've spotted 2 warning signs for Toplofikatsia-Ruse AD that you might be interested in.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.