Stock Analysis

The Trend Of High Returns At Motor Oil (Hellas) Corinth Refineries (ATH:MOH) Has Us Very Interested

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If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding 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. Speaking of which, we noticed some great changes in Motor Oil (Hellas) Corinth Refineries' (ATH:MOH) returns on capital, so let's have a look.

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. The formula for this calculation on Motor Oil (Hellas) Corinth Refineries is:

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

0.31 = €1.6b ÷ (€7.2b - €2.1b) (Based on the trailing twelve months to March 2023).

Thus, 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

ATSE:MOH Return on Capital Employed August 14th 2023

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'd like, you can check out the forecasts from the analysts covering Motor Oil (Hellas) Corinth Refineries here for free.

The Trend Of ROCE

The trends we've noticed at Motor Oil (Hellas) Corinth Refineries are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 31%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 166%. So we're very much inspired by what we're seeing at Motor Oil (Hellas) Corinth Refineries thanks to its ability to profitably reinvest capital.

Our Take On Motor Oil (Hellas) Corinth Refineries' ROCE

In summary, it's great to see that Motor Oil (Hellas) Corinth Refineries can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 49% return over the last five years. In light of that, we think it's worth looking further into this stock because if Motor Oil (Hellas) Corinth Refineries can keep these trends up, it could have a bright future ahead.

On a final note, we found 3 warning signs for Motor Oil (Hellas) Corinth Refineries (1 is a bit unpleasant) you should be aware of.

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.