Returns On Capital Are Showing Encouraging Signs At Losinjska Plovidba Holding d.d (ZGSE:LPLH)

There are a few key trends to look for if we want to identify the next multi-bagger. 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. With that in mind, we've noticed some promising trends at Losinjska Plovidba Holding d.d (ZGSE:LPLH) 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. Analysts use this formula to calculate it for Losinjska Plovidba Holding d.d:

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

0.031 = €779k ÷ (€31m - €5.5m) (Based on the trailing twelve months to March 2023).

Therefore, Losinjska Plovidba Holding d.d has an ROCE of 3.1%. In absolute terms, that's a low return and it also under-performs the Shipping industry average of 15%.

See our latest analysis for Losinjska Plovidba Holding 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 Losinjska Plovidba Holding d.d's past further, check out this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For Losinjska Plovidba Holding d.d Tell Us?

While there are companies with higher returns on capital out there, we still find the trend at Losinjska Plovidba Holding d.d promising. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 217% 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. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

In Conclusion...

To bring it all together, Losinjska Plovidba Holding d.d has done well to increase the returns it's generating from its capital employed. Considering the stock has delivered 22% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

If you want to continue researching Losinjska Plovidba Holding d.d, you might be interested to know about the 1 warning sign that our analysis has discovered.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.