We Like These Underlying Return On Capital Trends At OT Logistics (WSE:OTS)

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. So when we looked at OT Logistics (WSE:OTS) and its trend of ROCE, 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. Analysts use this formula to calculate it for OT Logistics:

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

0.082 = zł36m ÷ (zł632m - zł194m) (Based on the trailing twelve months to March 2022).

So, OT Logistics has an ROCE of 8.2%. In absolute terms, that's a low return and it also under-performs the Shipping industry average of 11%.

Check out our latest analysis for OT Logistics

Historical performance is a great place to start when researching a stock so above you can see the gauge for OT Logistics' ROCE against it's prior returns. If you'd like to look at how OT Logistics has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

The Trend Of ROCE

We're pretty happy with how the ROCE has been trending at OT Logistics. We found that the returns on capital employed over the last five years have risen by 396%. The company is now earning zł0.08 per dollar of capital employed. Speaking of capital employed, the company is actually utilizing 25% less than it was five years ago, which can be indicative of a business that's improving its efficiency. OT Logistics may be selling some assets so it's worth investigating if the business has plans for future investments to increase returns further still.

The Bottom Line On OT Logistics' ROCE

In a nutshell, we're pleased to see that OT Logistics has been able to generate higher returns from less capital. And since the stock has fallen 32% over the last five years, there might be an opportunity here. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

OT Logistics does have some risks, we noticed 5 warning signs (and 3 which make us uncomfortable) we think you should know about.

While OT Logistics 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.