Returns On Capital Are A Standout For Sunex (WSE:SNX)

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at the ROCE trend of Sunex (WSE:SNX) 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 Sunex:

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

0.22 = zł16m ÷ (zł135m - zł64m) (Based on the trailing twelve months to March 2022).

So, Sunex has an ROCE of 22%. That's a fantastic return and not only that, it outpaces the average of 9.3% earned by companies in a similar industry.

Check out our latest analysis for Sunex

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

The Trend Of ROCE

Sunex is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 22%. Basically the business is earning more per dollar of capital invested and in addition to that, 146% more capital is being employed now too. So we're very much inspired by what we're seeing at Sunex thanks to its ability to profitably reinvest capital.

For the record though, there was a noticeable increase in the company's current liabilities over the period, so we would attribute some of the ROCE growth to that. Effectively this means that suppliers or short-term creditors are now funding 47% of the business, which is more than it was five years ago. And with current liabilities at those levels, that's pretty high.

What We Can Learn From Sunex's ROCE

To sum it up, Sunex has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a staggering 3,192% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Sunex can keep these trends up, it could have a bright future ahead.

If you want to know some of the risks facing Sunex we've found 5 warning signs (3 are significant!) that you should be aware of before investing here.

Sunex is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.