Why You Should Care About Kino Polska TV Spolka Akcyjna's (WSE:KPL) Strong 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? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, the ROCE of Kino Polska TV Spolka Akcyjna (WSE:KPL) looks attractive right now, so lets see what the trend of returns can tell us.

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. Analysts use this formula to calculate it for Kino Polska TV Spolka Akcyjna:

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

0.22 = zł39m ÷ (zł240m - zł64m) (Based on the trailing twelve months to March 2021).

Thus, Kino Polska TV Spolka Akcyjna has an ROCE of 22%. That's a fantastic return and not only that, it outpaces the average of 16% earned by companies in a similar industry.

Check out our latest analysis for Kino Polska TV Spolka Akcyjna

In the above chart we have measured Kino Polska TV Spolka Akcyjna's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Kino Polska TV Spolka Akcyjna here for free.

What Can We Tell From Kino Polska TV Spolka Akcyjna's ROCE Trend?

In terms of Kino Polska TV Spolka Akcyjna's history of ROCE, it's quite impressive. The company has employed 122% more capital in the last five years, and the returns on that capital have remained stable at 22%. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. If Kino Polska TV Spolka Akcyjna can keep this up, we'd be very optimistic about its future.

Our Take On Kino Polska TV Spolka Akcyjna's ROCE

In the end, the company has proven it can reinvest it's capital at high rates of returns, which you'll remember is a trait of a multi-bagger. However, over the last five years, the stock has only delivered a 38% return to shareholders who held over that period. So because of the trends we're seeing, we'd recommend looking further into this stock to see if it has the makings of a multi-bagger.

On a separate note, we've found 1 warning sign for Kino Polska TV Spolka Akcyjna you'll probably want to know about.

Kino Polska TV Spolka Akcyjna is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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