Stock Analysis

Should We Be Excited About The Trends Of Returns At Thessaloniki Water Supply & Sewerage Co (ATH:EYAPS)?

ATSE:EYAPS
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If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after investigating Thessaloniki Water Supply & Sewerage Co (ATH:EYAPS), we don't think it's current trends fit the mold of a multi-bagger.

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

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. Analysts use this formula to calculate it for Thessaloniki Water Supply & Sewerage Co:

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

0.089 = €18m ÷ (€227m - €25m) (Based on the trailing twelve months to June 2020).

Thus, Thessaloniki Water Supply & Sewerage Co has an ROCE of 8.9%. On its own that's a low return, but compared to the average of 5.2% generated by the Water Utilities industry, it's much better.

View our latest analysis for Thessaloniki Water Supply & Sewerage Co

roce
ATSE:EYAPS Return on Capital Employed December 28th 2020

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Thessaloniki Water Supply & Sewerage Co has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For Thessaloniki Water Supply & Sewerage Co Tell Us?

There hasn't been much to report for Thessaloniki Water Supply & Sewerage Co's returns and its level of capital employed because both metrics have been steady for the past five years. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. So unless we see a substantial change at Thessaloniki Water Supply & Sewerage Co in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

The Bottom Line On Thessaloniki Water Supply & Sewerage Co's ROCE

We can conclude that in regards to Thessaloniki Water Supply & Sewerage Co's returns on capital employed and the trends, there isn't much change to report on. Since the stock has gained an impressive 86% over the last five years, investors must think there's better things to come. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.

On a final note, we've found 1 warning sign for Thessaloniki Water Supply & Sewerage Co that we think you should be aware of.

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