Why The 44% Return On Capital At Synektik Spólka Akcyjna (WSE:SNT) Should Have Your Attention

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in Synektik Spólka Akcyjna's (WSE:SNT) 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. The formula for this calculation on Synektik Spólka Akcyjna is:

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

0.44 = zł91m ÷ (zł398m - zł190m) (Based on the trailing twelve months to December 2023).

So, Synektik Spólka Akcyjna has an ROCE of 44%. In absolute terms that's a great return and it's even better than the Healthcare Services industry average of 9.2%.

See our latest analysis for Synektik Spólka Akcyjna

Above you can see how the current ROCE for Synektik Spólka Akcyjna compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Synektik Spólka Akcyjna .

How Are Returns Trending?

Investors would be pleased with what's happening at Synektik Spólka Akcyjna. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 44%. Basically the business is earning more per dollar of capital invested and in addition to that, 97% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

For the record though, there was a noticeable increase in the company's current liabilities over the period, so we would attribute some of the ROCE growth to that. The current liabilities has increased to 48% of total assets, so the business is now more funded by the likes of its suppliers or short-term creditors. And with current liabilities at those levels, that's pretty high.

The Key Takeaway

To sum it up, Synektik Spólka Akcyjna has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a staggering 1,069% to shareholders over the last five years, it looks like investors are recognizing these changes. 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.

Synektik Spólka Akcyjna does have some risks though, and we've spotted 1 warning sign for Synektik Spólka Akcyjna that you might be interested in.

High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.