Stock Analysis

Motor Oil (Hellas) Corinth Refineries (ATH:MOH) Will Want To Turn Around Its Return Trends

ATSE:MOH
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If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. 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. Although, when we looked at Motor Oil (Hellas) Corinth Refineries (ATH:MOH), it didn't seem to tick all of these boxes.

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. Analysts use this formula to calculate it for Motor Oil (Hellas) Corinth Refineries:

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

0.14 = €502m ÷ (€5.4b - €1.8b) (Based on the trailing twelve months to March 2022).

Therefore, Motor Oil (Hellas) Corinth Refineries has an ROCE of 14%. That's a relatively normal return on capital, and it's around the 12% generated by the Oil and Gas industry.

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

roce
ATSE:MOH Return on Capital Employed August 21st 2022

Above you can see how the current ROCE for Motor Oil (Hellas) Corinth Refineries compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

How Are Returns Trending?

When we looked at the ROCE trend at Motor Oil (Hellas) Corinth Refineries, we didn't gain much confidence. To be more specific, ROCE has fallen from 25% over the last five years. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. If these investments prove successful, this can bode very well for long term stock performance.

The Bottom Line On Motor Oil (Hellas) Corinth Refineries' ROCE

In summary, despite lower returns in the short term, we're encouraged to see that Motor Oil (Hellas) Corinth Refineries is reinvesting for growth and has higher sales as a result. In light of this, the stock has only gained 22% over the last five years. Therefore we'd recommend looking further into this stock to confirm if it has the makings of a good investment.

Motor Oil (Hellas) Corinth Refineries does come with some risks though, we found 4 warning signs in our investment analysis, and 3 of those are a bit unpleasant...

While Motor Oil (Hellas) Corinth Refineries isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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.