Oponeo.pl (WSE:OPN) Knows How To Allocate Capital Effectively

There are a few key trends to look for if we want to identify the next multi-bagger. 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. Speaking of which, we noticed some great changes in Oponeo.pl's (WSE:OPN) returns on capital, so let's have a look.

What Is 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 Oponeo.pl:

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

0.34 = zł116m ÷ (zł974m - zł631m) (Based on the trailing twelve months to September 2024).

Therefore, Oponeo.pl has an ROCE of 34%. That's a fantastic return and not only that, it outpaces the average of 19% earned by companies in a similar industry.

View our latest analysis for Oponeo.pl

Above you can see how the current ROCE for Oponeo.pl compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Oponeo.pl for free.

What Does the ROCE Trend For Oponeo.pl Tell Us?

The trends we've noticed at Oponeo.pl are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 34%. Basically the business is earning more per dollar of capital invested and in addition to that, 105% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

Another thing to note, Oponeo.pl has a high ratio of current liabilities to total assets of 65%. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

The Key Takeaway

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 Oponeo.pl has. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

One more thing to note, we've identified 2 warning signs with Oponeo.pl and understanding them should be part of your investment process.

Oponeo.pl 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.