Atlantska Plovidba d.d (ZGSE:ATPL) Shareholders Will Want The ROCE Trajectory To Continue

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at Atlantska Plovidba d.d (ZGSE:ATPL) and its trend of ROCE, we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Atlantska Plovidba d.d, this is the formula:

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

0.03 = Kn39m ÷ (Kn1.4b - Kn151m) (Based on the trailing twelve months to March 2021).

So, Atlantska Plovidba d.d has an ROCE of 3.0%. In absolute terms, that's a low return and it also under-performs the Shipping industry average of 4.7%.

View our latest analysis for Atlantska Plovidba 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, revenue and cash flow of Atlantska Plovidba d.d, check out these free graphs here.

So How Is Atlantska Plovidba d.d's ROCE Trending?

It's great to see that Atlantska Plovidba d.d has started to generate some pre-tax earnings from prior investments. While the business is profitable now, it used to be incurring losses on invested capital five years ago. Additionally, the business is utilizing 23% less capital than it was five years ago, and taken at face value, that can mean the company needs less funds at work to get a return. Atlantska Plovidba d.d could be selling under-performing assets since the ROCE is improving.

The Bottom Line

In the end, Atlantska Plovidba d.d has proven it's capital allocation skills are good with those higher returns from less amount of capital. And a remarkable 178% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you want to know some of the risks facing Atlantska Plovidba d.d we've found 4 warning signs (1 is a bit unpleasant!) that you should be aware of before investing here.

While Atlantska Plovidba 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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