PCC Exol (WSE:PCX) Could Become A Multi-Bagger

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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. And in light of that, the trends we're seeing at PCC Exol's (WSE:PCX) look very promising so lets take a look.

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. Analysts use this formula to calculate it for PCC Exol:

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

0.25 = zł157m ÷ (zł833m - zł212m) (Based on the trailing twelve months to September 2022).

Therefore, PCC Exol has an ROCE of 25%. In absolute terms that's a great return and it's even better than the Chemicals industry average of 15%.

View our latest analysis for PCC Exol

Historical performance is a great place to start when researching a stock so above you can see the gauge for PCC Exol's ROCE against it's prior returns. If you'd like to look at how PCC Exol has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

So How Is PCC Exol's ROCE Trending?

PCC Exol is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 25%. Basically the business is earning more per dollar of capital invested and in addition to that, 42% more capital is being employed now too. So we're very much inspired by what we're seeing at PCC Exol thanks to its ability to profitably reinvest capital.

Our Take On PCC Exol's ROCE

All in all, it's terrific to see that PCC Exol is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 198% to shareholders over the last five years, it looks like investors are recognizing these changes. 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.

PCC Exol does have some risks though, and we've spotted 2 warning signs for PCC Exol that you might be interested in.

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.

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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.