Is There More Growth In Store For Atlantska Plovidba d.d's (ZGSE:ATPL) Returns On Capital?

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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.

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. Analysts use this formula to calculate it for Atlantska Plovidba d.d:

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

0.015 = Kn19m ÷ (Kn1.4b - Kn149m) (Based on the trailing twelve months to September 2020).

Therefore, Atlantska Plovidba d.d has an ROCE of 1.5%. In absolute terms, that's a low return and it also under-performs the Shipping industry average of 5.3%.

View 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're interested in investigating Atlantska Plovidba d.d's past further, check out this free graph of past earnings, revenue and cash flow.

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

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. In regards to capital employed, Atlantska Plovidba d.d is using 37% less capital than it was five years ago, which on the surface, can indicate that the business has become more efficient at generating these returns. The reduction could indicate that the company is selling some assets, and considering returns are up, they appear to be selling the right ones.

In Conclusion...

In a nutshell, we're pleased to see that Atlantska Plovidba d.d has been able to generate higher returns from less capital. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 12% to shareholders. So with that in mind, we think the stock deserves further research.

Atlantska Plovidba d.d does have some risks though, and we've spotted 2 warning signs for Atlantska Plovidba d.d that you might be interested in.

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.

When trading Atlantska Plovidba d.d or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.