The Return Trends At AD Plastik d.d (ZGSE:ADPL) Look Promising

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out 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. With that in mind, we've noticed some promising trends at AD Plastik d.d (ZGSE:ADPL) so let's look a bit deeper.

What is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for AD Plastik d.d, this is the formula:

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

0.064 = Kn70m ÷ (Kn1.6b - Kn467m) (Based on the trailing twelve months to December 2020).

So, AD Plastik d.d has an ROCE of 6.4%. On its own, that's a low figure but it's around the 7.4% average generated by the Auto Components industry.

Check out our latest analysis for AD Plastik d.d

In the above chart we have measured AD Plastik d.d's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering AD Plastik d.d here for free.

The Trend Of ROCE

AD Plastik d.d's ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 32% in that same time. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

Our Take On AD Plastik d.d's ROCE

In summary, we're delighted to see that AD Plastik d.d has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And a remarkable 144% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

One more thing to note, we've identified 3 warning signs with AD Plastik d.d and understanding these should be part of your investment process.

While AD Plastik d.d may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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This article by Simply Wall St is general in nature. 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.
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