Returns At Grupa RECYKL (WSE:GRC) Are On The Way Up

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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. Speaking of which, we noticed some great changes in Grupa RECYKL's (WSE:GRC) returns on capital, so let's have a look.

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 Grupa RECYKL, this is the formula:

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

0.16 = zł19m ÷ (zł163m - zł43m) (Based on the trailing twelve months to June 2022).

Therefore, Grupa RECYKL has an ROCE of 16%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Commercial Services industry average of 17%.

View our latest analysis for Grupa RECYKL

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 Grupa RECYKL, check out these free graphs here.

What Can We Tell From Grupa RECYKL's ROCE Trend?

We like the trends that we're seeing from Grupa RECYKL. Over the last five years, returns on capital employed have risen substantially to 16%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 130%. So we're very much inspired by what we're seeing at Grupa RECYKL thanks to its ability to profitably reinvest capital.

Our Take On Grupa RECYKL's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Grupa RECYKL has. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you want to continue researching Grupa RECYKL, you might be interested to know about the 3 warning signs that our analysis has discovered.

While Grupa RECYKL 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.