Stock Analysis

Motor Oil (Hellas) Corinth Refineries (ATH:MOH) Knows How To Allocate Capital

ATSE:MOH
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What are the early trends we should look for to identify a stock that could multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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. Ergo, when we looked at the ROCE trends at Motor Oil (Hellas) Corinth Refineries (ATH:MOH), we liked what we saw.

Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for Motor Oil (Hellas) Corinth Refineries, this is the formula:

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

0.31 = €1.3b ÷ (€6.4b - €2.3b) (Based on the trailing twelve months to September 2022).

Therefore, Motor Oil (Hellas) Corinth Refineries has an ROCE of 31%. In absolute terms that's a great return and it's even better than the Oil and Gas industry average of 15%.

Check out our latest analysis for Motor Oil (Hellas) Corinth Refineries

roce
ATSE:MOH Return on Capital Employed December 15th 2022

In the above chart we have measured Motor Oil (Hellas) Corinth Refineries' prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Motor Oil (Hellas) Corinth Refineries here for free.

The Trend Of ROCE

We'd be pretty happy with returns on capital like Motor Oil (Hellas) Corinth Refineries. The company has employed 111% more capital in the last five years, and the returns on that capital have remained stable at 31%. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. If Motor Oil (Hellas) Corinth Refineries can keep this up, we'd be very optimistic about its future.

The Key Takeaway

In summary, we're delighted to see that Motor Oil (Hellas) Corinth Refineries has been compounding returns by reinvesting at consistently high rates of return, as these are common traits of a multi-bagger. Therefore it's no surprise that shareholders have earned a respectable 48% return if they held over the last five years. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

If you want to know some of the risks facing Motor Oil (Hellas) Corinth Refineries we've found 4 warning signs (2 are concerning!) that you should be aware of before investing here.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity.

Valuation is complex, but we're helping make it simple.

Find out whether Motor Oil (Hellas) Corinth Refineries is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.