We Like Tarczynski's (WSE:TAR) Returns And Here's How They're Trending

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out 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. And in light of that, the trends we're seeing at Tarczynski's (WSE:TAR) look very promising so lets take a look.

Understanding 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. The formula for this calculation on Tarczynski is:

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

0.20 = zł227m ÷ (zł1.7b - zł516m) (Based on the trailing twelve months to June 2024).

So, Tarczynski has an ROCE of 20%. That's a fantastic return and not only that, it outpaces the average of 13% earned by companies in a similar industry.

See our latest analysis for Tarczynski

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'd like to look at how Tarczynski has performed in the past in other metrics, you can view this free graph of Tarczynski's past earnings, revenue and cash flow.

What Can We Tell From Tarczynski's ROCE Trend?

The trends we've noticed at Tarczynski are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 20%. 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 159%. So we're very much inspired by what we're seeing at Tarczynski thanks to its ability to profitably reinvest capital.

The Key Takeaway

In summary, it's great to see that Tarczynski can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And a remarkable 744% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

One final note, you should learn about the 2 warning signs we've spotted with Tarczynski (including 1 which is concerning) .

Tarczynski 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.