Dino Polska (WSE:DNP) Knows How To Allocate Capital Effectively

There are a few key trends to look for if we want to identify the next multi-bagger. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. With that in mind, the ROCE of Dino Polska (WSE:DNP) looks great, so lets see what the trend can tell us.

Return On Capital Employed (ROCE): What is it?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Dino Polska:

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

0.26 = zł945m ÷ (zł5.8b - zł2.2b) (Based on the trailing twelve months to June 2021).

So, Dino Polska has an ROCE of 26%. In absolute terms that's a great return and it's even better than the Consumer Retailing industry average of 11%.

Check out our latest analysis for Dino Polska

Above you can see how the current ROCE for Dino Polska compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Dino Polska here for free.

What Can We Tell From Dino Polska's ROCE Trend?

Investors would be pleased with what's happening at Dino Polska. Over the last five years, returns on capital employed have risen substantially to 26%. The amount of capital employed has increased too, by 255%. So we're very much inspired by what we're seeing at Dino Polska thanks to its ability to profitably reinvest capital.

In Conclusion...

All in all, it's terrific to see that Dino Polska is reaping the rewards from prior investments and is growing its capital base. And with the stock having performed exceptionally well over the last three years, these patterns are being accounted for by investors. Therefore, we think it would be worth your time to check if these trends are going to continue.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 2 warning signs for Dino Polska (of which 1 shouldn't be ignored!) that you should know about.

Dino Polska 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.

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.

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