There's Been No Shortage Of Growth Recently For Zagrebacke Pekarne Klara d.d's (ZGSE:ZPKL) Returns On Capital

If you're looking for a multi-bagger, there's a few things to keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, we've noticed some promising trends at Zagrebacke Pekarne Klara d.d (ZGSE:ZPKL) so let's look a bit deeper.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Zagrebacke Pekarne Klara d.d, this is the formula:

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

0.099 = €2.4m ÷ (€35m - €11m) (Based on the trailing twelve months to September 2023).

Thus, Zagrebacke Pekarne Klara d.d has an ROCE of 9.9%. In absolute terms, that's a low return but it's around the Food industry average of 9.2%.

See our latest analysis for Zagrebacke Pekarne Klara 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 want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Zagrebacke Pekarne Klara d.d.

So How Is Zagrebacke Pekarne Klara d.d's ROCE Trending?

Zagrebacke Pekarne Klara d.d's ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 634% 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. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

In Conclusion...

In summary, we're delighted to see that Zagrebacke Pekarne Klara d.d has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Since the stock has returned a staggering 710% to shareholders over the last five years, it looks like investors are recognizing these changes. 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.

One more thing, we've spotted 2 warning signs facing Zagrebacke Pekarne Klara d.d that you might find interesting.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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.