Auto Hrvatska d.d's (ZGSE:AUHR) Returns On Capital Are Heading Higher

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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. So on that note, Auto Hrvatska d.d (ZGSE:AUHR) looks quite promising in regards to its trends of return on capital.

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

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

0.15 = €14m ÷ (€135m - €42m) (Based on the trailing twelve months to December 2024).

So, Auto Hrvatska d.d has an ROCE of 15%. In absolute terms, that's a satisfactory return, but compared to the Specialty Retail industry average of 9.1% it's much better.

See our latest analysis for Auto Hrvatska 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're interested in investigating Auto Hrvatska d.d's past further, check out this free graph covering Auto Hrvatska d.d's past earnings, revenue and cash flow .

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

We like the trends that we're seeing from Auto Hrvatska d.d. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 15%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 45%. So we're very much inspired by what we're seeing at Auto Hrvatska d.d thanks to its ability to profitably reinvest capital.

In Conclusion...

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 Auto Hrvatska d.d has. Since the stock has returned a staggering 127% 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.

Like most companies, Auto Hrvatska d.d does come with some risks, and we've found 1 warning sign that you should be aware of.

While Auto Hrvatska 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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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.