Will Poligrafici Printing's (BIT:POPR) Growth In ROCE Persist?

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So on that note, Poligrafici Printing (BIT:POPR) looks quite promising in regards to its trends of return on capital.

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 Poligrafici Printing:

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

0.076 = €3.1m ÷ (€50m - €9.5m) (Based on the trailing twelve months to September 2020).

Thus, Poligrafici Printing has an ROCE of 7.6%. On its own, that's a low figure but it's around the 7.0% average generated by the Commercial Services industry.

See our latest analysis for Poligrafici Printing

Historical performance is a great place to start when researching a stock so above you can see the gauge for Poligrafici Printing's ROCE against it's prior returns. If you're interested in investigating Poligrafici Printing's past further, check out this free graph of past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

Shareholders will be relieved that Poligrafici Printing has broken into profitability. The company was generating losses five years ago, but has managed to turn it around and as we saw earlier is now earning 7.6%, which is always encouraging. 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 Bottom Line On Poligrafici Printing's ROCE

To sum it up, Poligrafici Printing is collecting higher returns from the same amount of capital, and that's impressive. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 48% return over the last five years. 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.

If you'd like to know about the risks facing Poligrafici Printing, we've discovered 3 warning signs that you should be aware of.

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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