Returns On Capital Are A Standout For 4MASS Spólka Akcyjna (WSE:4MS)

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. And in light of that, the trends we're seeing at 4MASS Spólka Akcyjna's (WSE:4MS) look very promising so lets take a look.

What Is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for 4MASS Spólka Akcyjna:

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

0.35 = zł22m ÷ (zł71m - zł8.7m) (Based on the trailing twelve months to September 2023).

So, 4MASS Spólka Akcyjna has an ROCE of 35%. In absolute terms that's a great return and it's even better than the Personal Products industry average of 12%.

Check out our latest analysis for 4MASS Spólka Akcyjna

Above you can see how the current ROCE for 4MASS 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 report on analyst forecasts for the company.

So How Is 4MASS Spólka Akcyjna's ROCE Trending?

4MASS Spólka Akcyjna is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 35%. The amount of capital employed has increased too, by 1,148%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

On a related note, the company's ratio of current liabilities to total assets has decreased to 12%, which basically reduces it's funding from the likes of short-term creditors or suppliers. This tells us that 4MASS Spólka Akcyjna has grown its returns without a reliance on increasing their current liabilities, which we're very happy with.

The Bottom Line On 4MASS Spólka Akcyjna's ROCE

In summary, it's great to see that 4MASS Spólka Akcyjna 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 231% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if 4MASS Spólka Akcyjna can keep these trends up, it could have a bright future ahead.

If you want to continue researching 4MASS Spólka Akcyjna, you might be interested to know about the 2 warning signs that our analysis has discovered.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high 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.