Investors Will Want Adriatic Croatia International Club za djelatnost marina d.d's (ZGSE:ACI) Growth In ROCE To Persist

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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. With that in mind, we've noticed some promising trends at Adriatic Croatia International Club za djelatnost marina d.d (ZGSE:ACI) so let's look a bit deeper.

Return On Capital Employed (ROCE): What Is It?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Adriatic Croatia International Club za djelatnost marina d.d, this is the formula:

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

0.046 = Kn26m ÷ (Kn716m - Kn145m) (Based on the trailing twelve months to June 2022).

So, Adriatic Croatia International Club za djelatnost marina d.d has an ROCE of 4.6%. In absolute terms, that's a low return, but it's much better than the Hospitality industry average of 3.1%.

View our latest analysis for Adriatic Croatia International Club za djelatnost marina d.d

Historical performance is a great place to start when researching a stock so above you can see the gauge for Adriatic Croatia International Club za djelatnost marina d.d's ROCE against it's prior returns. If you'd like to look at how Adriatic Croatia International Club za djelatnost marina d.d has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

The Trend Of ROCE

While the ROCE isn't as high as some other companies out there, it's great to see it's on the up. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 95% over the last five years. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

The Bottom Line

In summary, we're delighted to see that Adriatic Croatia International Club za djelatnost marina d.d has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Since the stock has only returned 31% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

Adriatic Croatia International Club za djelatnost marina d.d does come with some risks though, we found 3 warning signs in our investment analysis, and 2 of those shouldn't be ignored...

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.