Is Thrace Plastics Holding and Commercial (ATH:PLAT) A Future Multi-bagger?

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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in Thrace Plastics Holding and Commercial's (ATH:PLAT) returns on capital, so let's have a look.

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. The formula for this calculation on Thrace Plastics Holding and Commercial is:

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

0.17 = €41m ÷ (€348m - €114m) (Based on the trailing twelve months to September 2020).

So, Thrace Plastics Holding and Commercial has an ROCE of 17%. On its own, that's a standard return, however it's much better than the 9.1% generated by the Chemicals industry.

View our latest analysis for Thrace Plastics Holding and Commercial

In the above chart we have measured Thrace Plastics Holding and Commercial's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

What Does the ROCE Trend For Thrace Plastics Holding and Commercial Tell Us?

The trends we've noticed at Thrace Plastics Holding and Commercial are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 17%. The amount of capital employed has increased too, by 53%. So we're very much inspired by what we're seeing at Thrace Plastics Holding and Commercial thanks to its ability to profitably reinvest capital.

What We Can Learn From Thrace Plastics Holding and Commercial's ROCE

To sum it up, Thrace Plastics Holding and Commercial has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

One more thing, we've spotted 2 warning signs facing Thrace Plastics Holding and Commercial that you might find interesting.

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