What Do The Returns On Capital At Cakovecki mlinovi d.d (ZGSE:CKML) Tell Us?

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Although, when we looked at Cakovecki mlinovi d.d (ZGSE:CKML), it didn't seem to tick all of these boxes.

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 Cakovecki mlinovi d.d is:

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

0.071 = Kn44m ÷ (Kn837m - Kn225m) (Based on the trailing twelve months to September 2020).

So, Cakovecki mlinovi d.d has an ROCE of 7.1%. On its own, that's a low figure but it's around the 7.8% average generated by the Food industry.

View our latest analysis for Cakovecki mlinovi d.d

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 Cakovecki mlinovi 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

There hasn't been much to report for Cakovecki mlinovi d.d'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 don't be surprised if Cakovecki mlinovi d.d doesn't end up being a multi-bagger in a few years time.

The Bottom Line On Cakovecki mlinovi d.d's ROCE

In a nutshell, Cakovecki mlinovi d.d has been trudging along with the same returns from the same amount of capital over the last five years. Since the stock has gained an impressive 64% over the last five years, investors must think there's better things to come. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

If you'd like to know about the risks facing Cakovecki mlinovi d.d, we've discovered 1 warning sign that you should be aware of.

While Cakovecki mlinovi d.d 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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