InPost's (AMS:INPST) Returns On Capital Are Heading Higher

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, 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 when we looked at InPost (AMS:INPST) and its trend of ROCE, we really liked what we saw.

Return On Capital Employed (ROCE): What Is It?

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 InPost:

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

0.15 = zł1.0b ÷ (zł9.1b - zł2.2b) (Based on the trailing twelve months to March 2023).

Therefore, InPost has an ROCE of 15%. That's a relatively normal return on capital, and it's around the 14% generated by the Logistics industry.

See our latest analysis for InPost

Above you can see how the current ROCE for InPost compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for InPost.

What Does the ROCE Trend For InPost Tell Us?

The fact that InPost is now generating some pre-tax profits from its prior investments is very encouraging. The company was generating losses five years ago, but now it's earning 15% which is a sight for sore eyes. In addition to that, InPost is employing 907% more capital than previously which is expected of a company that's trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

What We Can Learn From InPost's ROCE

In summary, it's great to see that InPost has managed to break into profitability and is continuing to reinvest in its business. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 61% return over the last year. In light of that, we think it's worth looking further into this stock because if InPost can keep these trends up, it could have a bright future ahead.

If you'd like to know about the risks facing InPost, we've discovered 1 warning sign that you should be aware of.

While InPost isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.