Returns At Equnico (WSE:EQU) Are On The Way Up

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding 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. Speaking of which, we noticed some great changes in Equnico's (WSE:EQU) returns on capital, so let's have a look.

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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. Analysts use this formula to calculate it for Equnico:

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

0.013 = zł4.9m ÷ (zł422m - zł37m) (Based on the trailing twelve months to June 2025).

Therefore, Equnico has an ROCE of 1.3%. In absolute terms, that's a low return and it also under-performs the Construction industry average of 9.6%.

View our latest analysis for Equnico

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'd like to look at how Equnico has performed in the past in other metrics, you can view this free graph of Equnico's past earnings, revenue and cash flow.

So How Is Equnico's ROCE Trending?

Equnico has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses five years ago, but now it's earning 1.3% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, Equnico is utilizing 3,136% more capital than it was five years ago. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

The Bottom Line On Equnico's ROCE

In summary, it's great to see that Equnico has managed to break into profitability and is continuing to reinvest in its business. And a remarkable 202% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

On a separate note, we've found 2 warning signs for Equnico you'll probably want to know about.

While Equnico 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.