Poligrafici Printing (BIT:POPR) Might Have The Makings Of A Multi-Bagger

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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 on that note, Poligrafici Printing (BIT:POPR) looks quite promising in regards to its trends of return on capital.

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. The formula for this calculation on Poligrafici Printing is:

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

0.068 = €2.7m ÷ (€49m - €9.7m) (Based on the trailing twelve months to March 2021).

So, Poligrafici Printing has an ROCE of 6.8%. On its own that's a low return on capital but it's in line with the industry's average returns of 6.8%.

View our latest analysis for Poligrafici Printing

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 Poligrafici Printing's past further, check out this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For Poligrafici Printing Tell Us?

Poligrafici Printing has broken into the black (profitability) and we're sure it's a sight for sore eyes. The company now earns 6.8% on its capital, because five years ago it was incurring losses. While returns have increased, the amount of capital employed by Poligrafici Printing has remained flat over the period. 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

In summary, we're delighted to see that Poligrafici Printing has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And a remarkable 162% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Poligrafici Printing can keep these trends up, it could have a bright future ahead.

Poligrafici Printing does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those is a bit concerning...

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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