We Like Grupa Kety's (WSE:KTY) Returns And Here's How They're Trending

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at the ROCE trend of Grupa Kety (WSE:KTY) we really liked what we saw.

What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Grupa Kety:

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

0.28 = zł681m ÷ (zł3.7b - zł1.3b) (Based on the trailing twelve months to September 2023).

Therefore, Grupa Kety has an ROCE of 28%. In absolute terms that's a great return and it's even better than the Metals and Mining industry average of 13%.

See our latest analysis for Grupa Kety

In the above chart we have measured Grupa Kety's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Grupa Kety .

What Can We Tell From Grupa Kety's ROCE Trend?

The trends we've noticed at Grupa Kety are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 28%. Basically the business is earning more per dollar of capital invested and in addition to that, 43% more capital is being employed now too. So we're very much inspired by what we're seeing at Grupa Kety thanks to its ability to profitably reinvest capital.

In Conclusion...

In summary, it's great to see that Grupa Kety 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 with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. 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.

One more thing, we've spotted 1 warning sign facing Grupa Kety that you might find interesting.

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.