Investors Will Want United Company RUSAL International's (HKG:486) Growth In ROCE To Persist

If you're looking for a multi-bagger, there's a few things to keep an eye out 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, we've noticed some promising trends at United Company RUSAL International (HKG:486) so let's look a bit deeper.

What is 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. Analysts use this formula to calculate it for United Company RUSAL International:

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

0.14 = US$2.2b ÷ (US$21b - US$4.6b) (Based on the trailing twelve months to December 2021).

Thus, United Company RUSAL International has an ROCE of 14%. That's a pretty standard return and it's in line with the industry average of 14%.

View our latest analysis for United Company RUSAL International

Above you can see how the current ROCE for United Company RUSAL International compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for United Company RUSAL International.

What Does the ROCE Trend For United Company RUSAL International Tell Us?

The trends we've noticed at United Company RUSAL International are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 14%. 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 37%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

Our Take On United Company RUSAL International's ROCE

To sum it up, United Company RUSAL International has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And since the stock has fallen 21% over the last five years, there might be an opportunity here. So researching this company further and determining whether or not these trends will continue seems justified.

United Company RUSAL International does have some risks though, and we've spotted 3 warning signs for United Company RUSAL International that you might be interested in.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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.