Returns On Capital At Grupa RECYKL (WSE:GRC) Have Hit The Brakes

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. That's why when we briefly looked at Grupa RECYKL's (WSE:GRC) ROCE trend, we were pretty happy with what we saw.

What Is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the 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)

0.12 = zł15m ÷ (zł182m - zł49m) (Based on the trailing twelve months to December 2022).

Therefore, Grupa RECYKL has an ROCE of 12%. In absolute terms, that's a pretty standard return but compared to the Commercial Services industry average it falls behind.

See our latest analysis for Grupa RECYKL

Historical performance is a great place to start when researching a stock so above you can see the gauge for Grupa RECYKL's ROCE against it's prior returns. If you'd like to look at how Grupa RECYKL has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

So How Is Grupa RECYKL's ROCE Trending?

While the returns on capital are good, they haven't moved much. Over the past five years, ROCE has remained relatively flat at around 12% and the business has deployed 142% more capital into its operations. 12% is a pretty standard return, and it provides some comfort knowing that Grupa RECYKL has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

In Conclusion...

To sum it up, Grupa RECYKL has simply been reinvesting capital steadily, at those decent rates of return. On top of that, the stock has rewarded shareholders with a remarkable 218% return to those who've held over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

If you want to know some of the risks facing Grupa RECYKL we've found 4 warning signs (1 is a bit unpleasant!) that you should be aware of before investing here.

While Grupa RECYKL 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.

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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.