- Auto Components
Sanok Rubber Company Spólka Akcyjna (WSE:SNK) Will Be Hoping To Turn Its Returns On Capital Around
To find a multi-bagger stock, what are the underlying trends we should look for in a business? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Although, when we looked at Sanok Rubber Company Spólka Akcyjna (WSE:SNK), it didn't seem to tick all of these boxes.
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. To calculate this metric for Sanok Rubber Company Spólka Akcyjna, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.063 = zł45m ÷ (zł1.0b - zł304m) (Based on the trailing twelve months to September 2022).
Therefore, Sanok Rubber Company Spólka Akcyjna has an ROCE of 6.3%. On its own, that's a low figure but it's around the 7.8% average generated by the Auto Components industry.
See our latest analysis for Sanok Rubber Company Spólka Akcyjna
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 want to delve into the historical earnings, revenue and cash flow of Sanok Rubber Company Spólka Akcyjna, check out these free graphs here.
So How Is Sanok Rubber Company Spólka Akcyjna's ROCE Trending?
When we looked at the ROCE trend at Sanok Rubber Company Spólka Akcyjna, we didn't gain much confidence. Around five years ago the returns on capital were 24%, but since then they've fallen to 6.3%. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. If these investments prove successful, this can bode very well for long term stock performance.
The Bottom Line On Sanok Rubber Company Spólka Akcyjna's ROCE
While returns have fallen for Sanok Rubber Company Spólka Akcyjna in recent times, we're encouraged to see that sales are growing and that the business is reinvesting in its operations. And there could be an opportunity here if other metrics look good too, because the stock has declined 52% in the last five years. So we think it'd be worthwhile to look further into this stock given the trends look encouraging.
Sanok Rubber Company Spólka Akcyjna does have some risks, we noticed 3 warning signs (and 1 which is potentially serious) we think you should know about.
While Sanok Rubber Company Spólka Akcyjna may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.
Valuation is complex, but we're helping make it simple.
Find out whether Sanok Rubber Company Spólka Akcyjna is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.View the Free Analysis
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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.
Sanok Rubber Company Spólka Akcyjna
Sanok Rubber Company Spólka Akcyjna provides rubber products, rubber-to-metal articles, and rubber with other materials for automotive, construction, agriculture, pharmacy, and household appliance markets in Europe and internationally.
Flawless balance sheet and overvalued.