Returns On Capital At Aplisens (WSE:APN) Paint An Interesting Picture

There are a few key trends to look for if we want to identify the next multi-bagger. 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. In light of that, when we looked at Aplisens (WSE:APN) and its ROCE trend, we weren't exactly thrilled.

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

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 Aplisens, this is the formula:

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

0.093 = zł16m ÷ (zł185m - zł12m) (Based on the trailing twelve months to September 2020).

So, Aplisens has an ROCE of 9.3%. Ultimately, that's a low return and it under-performs the Electronic industry average of 14%.

View our latest analysis for Aplisens

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're interested in investigating Aplisens' past further, check out this free graph of past earnings, revenue and cash flow.

What Can We Tell From Aplisens' ROCE Trend?

In terms of Aplisens' historical ROCE movements, the trend isn't fantastic. To be more specific, ROCE has fallen from 13% over the last five years. Meanwhile, the business is utilizing more capital but this hasn't moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

The Bottom Line On Aplisens' ROCE

To conclude, we've found that Aplisens is reinvesting in the business, but returns have been falling. Additionally, the stock's total return to shareholders over the last five years has been flat, which isn't too surprising. Therefore based on the analysis done in this article, we don't think Aplisens has the makings of a multi-bagger.

On a final note, we've found 2 warning signs for Aplisens that we think you should be aware of.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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