We Like These Underlying Return On Capital Trends At ATM Grupa (WSE:ATG)

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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, ATM Grupa (WSE:ATG) looks quite promising in regards to its trends of return on capital.

Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for ATM Grupa, this is the formula:

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

0.094 = zł31m ÷ (zł373m - zł46m) (Based on the trailing twelve months to September 2021).

Therefore, ATM Grupa has an ROCE of 9.4%. In absolute terms, that's a low return and it also under-performs the Entertainment industry average of 24%.

View our latest analysis for ATM Grupa

Historical performance is a great place to start when researching a stock so above you can see the gauge for ATM Grupa's ROCE against it's prior returns. If you're interested in investigating ATM Grupa's past further, check out this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For ATM Grupa Tell Us?

ATM Grupa'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 35% in that same time. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

What We Can Learn From ATM Grupa's ROCE

In summary, we're delighted to see that ATM Grupa has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 35% to shareholders. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

If you want to know some of the risks facing ATM Grupa we've found 3 warning signs (1 is a bit concerning!) that you should be aware of before investing here.

While ATM Grupa 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.