Will The ROCE Trend At Zaklady Magnezytowe ROPCZYCE (WSE:RPC) Continue?

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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. So on that note, Zaklady Magnezytowe ROPCZYCE (WSE:RPC) 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. Analysts use this formula to calculate it for Zaklady Magnezytowe ROPCZYCE:

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

0.094 = zł33m ÷ (zł439m - zł87m) (Based on the trailing twelve months to September 2020).

Therefore, Zaklady Magnezytowe ROPCZYCE has an ROCE of 9.4%. Even though it's in line with the industry average of 9.4%, it's still a low return by itself.

See our latest analysis for Zaklady Magnezytowe ROPCZYCE

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Zaklady Magnezytowe ROPCZYCE has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

The Trend Of ROCE

Zaklady Magnezytowe ROPCZYCE's ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 55% in that same time. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

The Key Takeaway

In summary, we're delighted to see that Zaklady Magnezytowe ROPCZYCE has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And with a respectable 60% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. 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.

On a final note, we've found 3 warning signs for Zaklady Magnezytowe ROPCZYCE that we think you should be aware of.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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