Stock Analysis

The Returns At Thessaloniki Water Supply & Sewerage Co (ATH:EYAPS) Aren't Growing

ATSE:EYAPS
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Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. In light of that, when we looked at Thessaloniki Water Supply & Sewerage Co (ATH:EYAPS) and its ROCE trend, we weren't exactly thrilled.

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 Thessaloniki Water Supply & Sewerage Co is:

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 5.1% 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 April 19th 2021

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

So How Is Thessaloniki Water Supply & Sewerage Co's ROCE Trending?

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

In a nutshell, Thessaloniki Water Supply & Sewerage Co has been trudging along with the same returns from the same amount of capital over the last five years. Although the market must be expecting these trends to improve because the stock has gained 84% over the last five years. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

On a final note, we've found 2 warning signs for Thessaloniki Water Supply & Sewerage Co that we think you should be aware of.

While Thessaloniki Water Supply & Sewerage Co 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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