Stock Analysis

Kutjevo d.d (ZGSE:KTJV) Might Have The Makings Of A Multi-Bagger

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ZGSE:KTJV
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Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, we've noticed some promising trends at Kutjevo d.d (ZGSE:KTJV) so let's look a bit deeper.

Understanding Return On Capital Employed (ROCE)

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 Kutjevo d.d, this is the formula:

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

0.061 = Kn32m ÷ (Kn623m - Kn95m) (Based on the trailing twelve months to December 2021).

So, Kutjevo d.d has an ROCE of 6.1%. Ultimately, that's a low return and it under-performs the Beverage industry average of 9.9%.

Check out our latest analysis for Kutjevo d.d

roce
ZGSE:KTJV Return on Capital Employed May 1st 2022

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 want to delve into the historical earnings, revenue and cash flow of Kutjevo d.d, check out these free graphs here.

The Trend Of ROCE

Kutjevo d.d has not disappointed with their ROCE growth. The figures show that over the last five years, ROCE has grown 193% whilst employing roughly the same amount of capital. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

The Key Takeaway

As discussed above, Kutjevo d.d appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 68% return over the last five years. Therefore, we think it would be worth your time to check if these trends are going to continue.

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

While Kutjevo 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.

Valuation is complex, but we're helping make it simple.

Find out whether Kutjevo d.d is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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