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

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at Atlantska Plovidba d.d (ZGSE:ATPL) so let's look a bit deeper.

What is 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. 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)

0.10 = Kn141m ÷ (Kn1.5b - Kn76m) (Based on the trailing twelve months to September 2021).

Thus, Atlantska Plovidba d.d has an ROCE of 10%. In absolute terms, that's a satisfactory return, but compared to the Shipping industry average of 8.5% it's much better.

See our latest analysis for Atlantska Plovidba d.d

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

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

Shareholders will be relieved that Atlantska Plovidba d.d has broken into profitability. While the business was unprofitable in the past, it's now turned things around and is earning 10% on its capital. Interestingly, the capital employed by the business has remained relatively flat, so these higher returns are either from prior investments paying off or increased efficiencies. With no noticeable increase in capital employed, it's worth knowing what the company plans on doing going forward in regards to reinvesting and growing the business. After all, a company can only become a long term multi-bagger if it continually reinvests in itself at high rates of return.

The Key Takeaway

To sum it up, Atlantska Plovidba d.d is collecting higher returns from the same amount of capital, and that's impressive. Since the stock has only returned 35% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. So with that in mind, we think the stock deserves further research.

If you'd like to know more about Atlantska Plovidba d.d, we've spotted 3 warning signs, and 1 of them doesn't sit too well with us.

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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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.