Is Thessaloniki Port Authority Societe Anonyme (ATH:OLTH) Likely To Turn Things Around?

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, 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. In light of that, when we looked at Thessaloniki Port Authority Societe Anonyme (ATH:OLTH) and its ROCE trend, we weren't exactly thrilled.

Return On Capital Employed (ROCE): What is it?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Thessaloniki Port Authority Societe Anonyme is:

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

0.11 = €23m ÷ (€244m - €35m) (Based on the trailing twelve months to June 2020).

Thus, Thessaloniki Port Authority Societe Anonyme has an ROCE of 11%. In absolute terms, that's a satisfactory return, but compared to the Infrastructure industry average of 6.2% it's much better.

See our latest analysis for Thessaloniki Port Authority Societe Anonyme

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

What The Trend Of ROCE Can Tell Us

On the surface, the trend of ROCE at Thessaloniki Port Authority Societe Anonyme doesn't inspire confidence. Around five years ago the returns on capital were 21%, but since then they've fallen to 11%. 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. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.

Our Take On Thessaloniki Port Authority Societe Anonyme's ROCE

While returns have fallen for Thessaloniki Port Authority Societe Anonyme in recent times, we're encouraged to see that sales are growing and that the business is reinvesting in its operations. These trends are starting to be recognized by investors since the stock has delivered a 19% gain to shareholders who've held 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.

Thessaloniki Port Authority Societe Anonyme does have some risks, we noticed 2 warning signs (and 1 which can't be ignored) we think you should know about.

While Thessaloniki Port Authority Societe Anonyme isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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