Zaklady Magnezytowe ROPCZYCE's (WSE:RPC) Returns On Capital Are Heading Higher

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, 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. Speaking of which, we noticed some great changes in Zaklady Magnezytowe ROPCZYCE's (WSE:RPC) returns on capital, so let's have a look.

Return On Capital Employed (ROCE): What is it?

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 Zaklady Magnezytowe ROPCZYCE:

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

0.092 = zł36m ÷ (zł466m - zł70m) (Based on the trailing twelve months to December 2021).

So, Zaklady Magnezytowe ROPCZYCE has an ROCE of 9.2%. On its own that's a low return on capital but it's in line with the industry's average returns of 9.4%.

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 want to delve into the historical earnings, revenue and cash flow of Zaklady Magnezytowe ROPCZYCE, check out these free graphs here.

How Are Returns Trending?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The data shows that returns on capital have increased substantially over the last five years to 9.2%. The amount of capital employed has increased too, by 26%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Bottom Line On Zaklady Magnezytowe ROPCZYCE's ROCE

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 Zaklady Magnezytowe ROPCZYCE has. Since the stock has returned a solid 67% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. In light of that, we think it's worth looking further into this stock because if Zaklady Magnezytowe ROPCZYCE can keep these trends up, it could have a bright future ahead.

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

While Zaklady Magnezytowe ROPCZYCE may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list 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.