Returns Are Gaining Momentum At Koszalinskie Przedsiebiorstwo Przemyslu Drzewnego Spólka Akcyjna (WSE:KPD)

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Koszalinskie Przedsiebiorstwo Przemyslu Drzewnego Spólka Akcyjna (WSE:KPD) looks quite promising in regards to its trends of return on capital.

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 Koszalinskie Przedsiebiorstwo Przemyslu Drzewnego Spólka Akcyjna is:

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

0.024 = zł2.8m ÷ (zł163m - zł46m) (Based on the trailing twelve months to September 2020).

So, Koszalinskie Przedsiebiorstwo Przemyslu Drzewnego Spólka Akcyjna has an ROCE of 2.4%. Ultimately, that's a low return and it under-performs the Forestry industry average of 9.3%.

See our latest analysis for Koszalinskie Przedsiebiorstwo Przemyslu Drzewnego Spólka Akcyjna

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

The Trend Of ROCE

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. The data shows that returns on capital have increased substantially over the last five years to 2.4%. 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 38%. So we're very much inspired by what we're seeing at Koszalinskie Przedsiebiorstwo Przemyslu Drzewnego Spólka Akcyjna thanks to its ability to profitably reinvest capital.

In Conclusion...

All in all, it's terrific to see that Koszalinskie Przedsiebiorstwo Przemyslu Drzewnego Spólka Akcyjna is reaping the rewards from prior investments and is growing its capital base. 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.

One more thing, we've spotted 3 warning signs facing Koszalinskie Przedsiebiorstwo Przemyslu Drzewnego Spólka Akcyjna that you might find interesting.

While Koszalinskie Przedsiebiorstwo Przemyslu Drzewnego Spólka Akcyjna may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.
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