Stock Analysis

We Think Cognor Holding (WSE:COG) Might Have The DNA Of A Multi-Bagger

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WSE:COG
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What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. And in light of that, the trends we're seeing at Cognor Holding's (WSE:COG) look very promising so lets take a look.

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. The formula for this calculation on Cognor Holding is:

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

0.46 = zł721m ÷ (zł2.1b - zł508m) (Based on the trailing twelve months to December 2022).

Thus, Cognor Holding has an ROCE of 46%. That's a fantastic return and not only that, it outpaces the average of 15% earned by companies in a similar industry.

View our latest analysis for Cognor Holding

roce
WSE:COG Return on Capital Employed May 5th 2023

In the above chart we have measured Cognor Holding's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Cognor Holding here for free.

What The Trend Of ROCE Can Tell Us

Investors would be pleased with what's happening at Cognor Holding. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 46%. The amount of capital employed has increased too, by 150%. So we're very much inspired by what we're seeing at Cognor Holding thanks to its ability to profitably reinvest capital.

In Conclusion...

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Cognor Holding has. And with the stock having performed exceptionally well over the last five 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.

If you'd like to know more about Cognor Holding, we've spotted 4 warning signs, and 2 of them make us uncomfortable.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

Valuation is complex, but we're helping make it simple.

Find out whether Cognor Holding is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

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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.