Zaklady Magnezytowe ROPCZYCE (WSE:RPC) Is Looking To Continue Growing Its Returns On Capital

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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. 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)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its 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).

Thus, Zaklady Magnezytowe ROPCZYCE has an ROCE of 9.4%. In absolute terms, that's a low return but it's around the Basic Materials industry average of 11%.

View our latest analysis for Zaklady Magnezytowe ROPCZYCE

Historical performance is a great place to start when researching a stock so above you can see the gauge for Zaklady Magnezytowe ROPCZYCE's ROCE against it's prior returns. 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.

What Can We Tell From Zaklady Magnezytowe ROPCZYCE's ROCE Trend?

Zaklady Magnezytowe ROPCZYCE has not disappointed with their ROCE growth. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 55% over the last five years. 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. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

Our Take On Zaklady Magnezytowe ROPCZYCE's ROCE

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. Since the stock has returned a solid 92% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

On a final note, we found 4 warning signs for Zaklady Magnezytowe ROPCZYCE (1 is potentially serious) you should be aware of.

While Zaklady Magnezytowe ROPCZYCE isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.