Returns Are Gaining Momentum At Orange Polska (WSE:OPL)

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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 when we looked at Orange Polska (WSE:OPL) and its trend of ROCE, we really liked what we saw.

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. The formula for this calculation on Orange Polska is:

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

0.058 = zł1.3b ÷ (zł26b - zł4.4b) (Based on the trailing twelve months to September 2024).

Therefore, Orange Polska has an ROCE of 5.8%. In absolute terms, that's a low return and it also under-performs the Telecom industry average of 10%.

Check out our latest analysis for Orange Polska

Above you can see how the current ROCE for Orange Polska 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 analyst report for Orange Polska .

So How Is Orange Polska's ROCE Trending?

Orange Polska's ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 290% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

What We Can Learn From Orange Polska's ROCE

To sum it up, Orange Polska is collecting higher returns from the same amount of capital, and that's impressive. Considering the stock has delivered 19% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

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

While Orange Polska isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.