Here's What's Concerning About Kutjevo d.d's (ZGSE:KTJV) Returns On Capital

Ignoring the stock price of a company, what are the underlying trends that tell us a business is past the growth phase? A business that's potentially in decline often shows two trends, a return on capital employed (ROCE) that's declining, and a base of capital employed that's also declining. Basically the company is earning less on its investments and it is also reducing its total assets. So after glancing at the trends within Kutjevo d.d (ZGSE:KTJV), we weren't too hopeful.

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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. Analysts use this formula to calculate it for Kutjevo d.d:

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

0.046 = €3.3m ÷ (€92m - €21m) (Based on the trailing twelve months to September 2025).

Therefore, Kutjevo d.d has an ROCE of 4.6%. In absolute terms, that's a low return and it also under-performs the Beverage industry average of 11%.

See our latest analysis for Kutjevo d.d

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

What Does the ROCE Trend For Kutjevo d.d Tell Us?

We are a bit worried about the trend of returns on capital at Kutjevo d.d. Unfortunately the returns on capital have diminished from the 6.6% that they were earning five years ago. And on the capital employed front, the business is utilizing roughly the same amount of capital as it was back then. This combination can be indicative of a mature business that still has areas to deploy capital, but the returns received aren't as high due potentially to new competition or smaller margins. If these trends continue, we wouldn't expect Kutjevo d.d to turn into a multi-bagger.

The Bottom Line

All in all, the lower returns from the same amount of capital employed aren't exactly signs of a compounding machine. However the stock has delivered a 52% return to shareholders over the last five years, so investors might be expecting the trends to turn around. Regardless, we don't feel too comfortable with the fundamentals so we'd be steering clear of this stock for now.

One more thing: We've identified 4 warning signs with Kutjevo d.d (at least 2 which are potentially serious) , and understanding them would certainly be useful.

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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.