We Like These Underlying Return On Capital Trends At PCC Rokita (WSE:PCR)

By
Simply Wall St
Published
August 31, 2021
WSE:PCR
Source: Shutterstock

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, we've noticed some promising trends at PCC Rokita (WSE:PCR) so let's look a bit deeper.

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 PCC Rokita is:

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

0.20 = zł327m ÷ (zł2.1b - zł451m) (Based on the trailing twelve months to June 2021).

So, PCC Rokita has an ROCE of 20%. In absolute terms, that's a satisfactory return, but compared to the Chemicals industry average of 8.5% it's much better.

See our latest analysis for PCC Rokita

roce
WSE:PCR Return on Capital Employed September 1st 2021

In the above chart we have measured PCC Rokita'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 report on analyst forecasts for the company.

The Trend Of ROCE

Investors would be pleased with what's happening at PCC Rokita. The data shows that returns on capital have increased substantially over the last five years to 20%. Basically the business is earning more per dollar of capital invested and in addition to that, 69% more capital is being employed now too. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Key Takeaway

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 PCC Rokita has. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 87% return over the last five years. Therefore, we think it would be worth your time to check if these trends are going to continue.

One final note, you should learn about the 3 warning signs we've spotted with PCC Rokita (including 1 which shouldn't be ignored) .

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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