Centrum Medyczne ENEL-MED's (WSE:ENE) Returns On Capital Not Reflecting Well On The Business

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. However, after investigating Centrum Medyczne ENEL-MED (WSE:ENE), we don't think it's current trends fit the mold of a multi-bagger.

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. The formula for this calculation on Centrum Medyczne ENEL-MED is:

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

0.02 = zł5.7m ÷ (zł380m - zł97m) (Based on the trailing twelve months to September 2021).

So, Centrum Medyczne ENEL-MED has an ROCE of 2.0%. In absolute terms, that's a low return and it also under-performs the Healthcare industry average of 8.9%.

Check out our latest analysis for Centrum Medyczne ENEL-MED

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

How Are Returns Trending?

Unfortunately, the trend isn't great with ROCE falling from 2.8% five years ago, while capital employed has grown 101%. That being said, Centrum Medyczne ENEL-MED raised some capital prior to their latest results being released, so that could partly explain the increase in capital employed. Centrum Medyczne ENEL-MED probably hasn't received a full year of earnings yet from the new funds it raised, so these figures should be taken with a grain of salt.

The Key Takeaway

In summary, Centrum Medyczne ENEL-MED is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. Since the stock has gained an impressive 41% over the last five years, investors must think there's better things to come. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

One final note, you should learn about the 3 warning signs we've spotted with Centrum Medyczne ENEL-MED (including 1 which shouldn't be ignored) .

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.