Returns On Capital Are A Standout For Wirtualna Polska Holding (WSE:WPL)

To find a multi-bagger stock, what are the underlying trends we should look for in a business? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at the ROCE trend of Wirtualna Polska Holding (WSE:WPL) we really liked what we saw.

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. The formula for this calculation on Wirtualna Polska Holding is:

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

0.21 = zł224m ÷ (zł1.3b - zł217m) (Based on the trailing twelve months to December 2021).

Therefore, Wirtualna Polska Holding has an ROCE of 21%. In absolute terms that's a great return and it's even better than the Interactive Media and Services industry average of 16%.

Check out our latest analysis for Wirtualna Polska Holding

Above you can see how the current ROCE for Wirtualna Polska Holding compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Wirtualna Polska Holding.

So How Is Wirtualna Polska Holding's ROCE Trending?

We like the trends that we're seeing from Wirtualna Polska Holding. Over the last five years, returns on capital employed have risen substantially to 21%. Basically the business is earning more per dollar of capital invested and in addition to that, 42% more capital is being employed now too. So we're very much inspired by what we're seeing at Wirtualna Polska Holding thanks to its ability to profitably reinvest capital.

Our Take On Wirtualna Polska Holding's ROCE

To sum it up, Wirtualna Polska Holding has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a solid 97% 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.

Like most companies, Wirtualna Polska Holding does come with some risks, and we've found 1 warning sign that you should be aware of.

Wirtualna Polska Holding 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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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.