Returns On Capital Are Showing Encouraging Signs At Beskidzkie Biuro Inwestycyjne (WSE:EEE)

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So when we looked at Beskidzkie Biuro Inwestycyjne (WSE:EEE) and its trend of ROCE, we really liked what we saw.

What Is 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. The formula for this calculation on Beskidzkie Biuro Inwestycyjne is:

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

0.18 = zł12m ÷ (zł70m - zł4.7m) (Based on the trailing twelve months to March 2024).

So, Beskidzkie Biuro Inwestycyjne has an ROCE of 18%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Professional Services industry average of 20%.

View our latest analysis for Beskidzkie Biuro Inwestycyjne

Historical performance is a great place to start when researching a stock so above you can see the gauge for Beskidzkie Biuro Inwestycyjne's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Beskidzkie Biuro Inwestycyjne.

What Does the ROCE Trend For Beskidzkie Biuro Inwestycyjne Tell Us?

We're delighted to see that Beskidzkie Biuro Inwestycyjne is reaping rewards from its investments and is now generating some pre-tax profits. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 18% on its capital. In addition to that, Beskidzkie Biuro Inwestycyjne is employing 1,145% 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 Beskidzkie Biuro Inwestycyjne's ROCE

Overall, Beskidzkie Biuro Inwestycyjne gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 51% return over the last five years. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you want to know some of the risks facing Beskidzkie Biuro Inwestycyjne we've found 2 warning signs (1 doesn't sit too well with us!) that you should be aware of before investing here.

While Beskidzkie Biuro Inwestycyjne 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.