Stock Analysis

What We Make Of Kutjevo d.d's (ZGSE:KTJV) Returns On Capital

  •  Updated
ZGSE:KTJV
Source: Shutterstock

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in Kutjevo d.d's (ZGSE:KTJV) returns on capital, so let's have a look.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested 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)

0.066 = Kn31m ÷ (Kn577m - Kn115m) (Based on the trailing twelve months to September 2020).

Thus, Kutjevo d.d has an ROCE of 6.6%. Ultimately, that's a low return and it under-performs the Beverage industry average of 9.1%.

View our latest analysis for Kutjevo d.d

roce
ZGSE:KTJV Return on Capital Employed January 12th 2021

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're interested in investigating Kutjevo d.d's past further, check out this free graph of past earnings, revenue and cash flow.

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

Kutjevo d.d has not disappointed with their ROCE growth. 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 85% over the last five years. 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.

In another part of our analysis, we noticed that the company's ratio of current liabilities to total assets decreased to 20%, which broadly means the business is relying less on its suppliers or short-term creditors to fund its operations. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance.

The Bottom Line

To bring it all together, Kutjevo d.d has done well to increase the returns it's generating from its capital employed. Since the stock has returned a staggering 105% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Kutjevo d.d can keep these trends up, it could have a bright future ahead.

Kutjevo d.d does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those is significant...

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.

When trading Kutjevo d.d or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide 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