InPost (AMS:INPST) Could Become A Multi-Bagger

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, the ROCE of InPost (AMS:INPST) looks great, so lets see what the trend can tell us.

Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for InPost, this is the formula:

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

0.21 = zł1.8b ÷ (zł11b - zł2.5b) (Based on the trailing twelve months to September 2024).

So, InPost has an ROCE of 21%. In absolute terms that's a great return and it's even better than the Logistics industry average of 11%.

Check out our latest analysis for InPost

In the above chart we have measured InPost's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for InPost .

What Can We Tell From InPost's ROCE Trend?

We like the trends that we're seeing from InPost. The data shows that returns on capital have increased substantially over the last five years to 21%. The amount of capital employed has increased too, by 712%. So we're very much inspired by what we're seeing at InPost thanks to its ability to profitably reinvest capital.

Our Take On InPost's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what InPost has. And with the stock having performed exceptionally well over the last three years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

One more thing, we've spotted 1 warning sign facing InPost that you might find interesting.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets 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.