We Like These Underlying Return On Capital Trends At Saponia d.d (ZGSE:SAPN)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. With that in mind, we've noticed some promising trends at Saponia d.d (ZGSE:SAPN) so let's look a bit deeper.

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

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. To calculate this metric for Saponia d.d, this is the formula:

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

0.15 = Kn86m ÷ (Kn902m - Kn323m) (Based on the trailing twelve months to December 2020).

So, Saponia d.d has an ROCE of 15%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Household Products industry average of 13%.

Check out our latest analysis for Saponia d.d

Historical performance is a great place to start when researching a stock so above you can see the gauge for Saponia d.d's ROCE against it's prior returns. If you'd like to look at how Saponia d.d has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What Can We Tell From Saponia d.d's ROCE Trend?

Saponia d.d has not disappointed with their ROCE growth. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 228% in that same time. 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.

Our Take On Saponia d.d's ROCE

To sum it up, Saponia d.d is collecting higher returns from the same amount of capital, and that's impressive. Since the stock has returned a staggering 102% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

On a final note, we found 3 warning signs for Saponia d.d (1 doesn't sit too well with us) you should be aware of.

While Saponia 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.

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