Stock Analysis

Kutjevo d.d's (ZGSE:KTJV) Returns On Capital Are Heading Higher

  •  Updated
ZGSE:KTJV
Source: Shutterstock

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. 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. So on that note, Kutjevo d.d (ZGSE:KTJV) looks quite promising in regards to its trends of return on capital.

Return On Capital Employed (ROCE): What is it?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its 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)

0.055 = Kn28m ÷ (Kn567m - Kn69m) (Based on the trailing twelve months to December 2020).

Therefore, Kutjevo d.d has an ROCE of 5.5%. In absolute terms, that's a low return and it also under-performs the Beverage industry average of 9.0%.

Check out our latest analysis for Kutjevo d.d

roce
ZGSE:KTJV Return on Capital Employed May 7th 2021

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

So How Is Kutjevo d.d's ROCE Trending?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The data shows that returns on capital have increased substantially over the last five years to 5.5%. Basically the business is earning more per dollar of capital invested and in addition to that, 21% more capital is being employed now too. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

One more thing to note, Kutjevo d.d has decreased current liabilities to 12% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance.

The Key Takeaway

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Kutjevo d.d has. And a remarkable 117% 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.

Kutjevo d.d does have some risks though, and we've spotted 1 warning sign for Kutjevo d.d that you might be interested in.

While Kutjevo 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.

If you're looking for stocks to buy, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted


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.

View the Free Analysis