The Returns At 01Cyberaton Proenergy Spolka Akcyjna (WSE:01C) Provide Us With Signs Of What's To Come

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. In light of that, when we looked at 01Cyberaton Proenergy Spolka Akcyjna (WSE:01C) and its ROCE trend, we weren't exactly thrilled.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for 01Cyberaton Proenergy Spolka Akcyjna, this is the formula:

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

0.0077 = zł718k ÷ (zł103m - zł9.9m) (Based on the trailing twelve months to September 2020).

So, 01Cyberaton Proenergy Spolka Akcyjna has an ROCE of 0.8%. In absolute terms, that's a low return and it also under-performs the Renewable Energy industry average of 6.3%.

View our latest analysis for 01Cyberaton Proenergy Spolka Akcyjna

Historical performance is a great place to start when researching a stock so above you can see the gauge for 01Cyberaton Proenergy Spolka Akcyjna's ROCE against it's prior returns. If you're interested in investigating 01Cyberaton Proenergy Spolka Akcyjna's past further, check out this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For 01Cyberaton Proenergy Spolka Akcyjna Tell Us?

Unfortunately, the trend isn't great with ROCE falling from 23% five years ago, while capital employed has grown 89%. However, some of the increase in capital employed could be attributed to the recent capital raising that's been completed prior to their latest reporting period, so keep that in mind when looking at the ROCE decrease. It's unlikely that all of the funds raised have been put to work yet, so as a consequence 01Cyberaton Proenergy Spolka Akcyjna might not have received a full period of earnings contribution from it.

In Conclusion...

From the above analysis, we find it rather worrisome that returns on capital and sales for 01Cyberaton Proenergy Spolka Akcyjna have fallen, meanwhile the business is employing more capital than it was five years ago. The market must be rosy on the stock's future because even though the underlying trends aren't too encouraging, the stock has soared 182%. Regardless, we don't feel too comfortable with the fundamentals so we'd be steering clear of this stock for now.

One final note, you should learn about the 4 warning signs we've spotted with 01Cyberaton Proenergy Spolka Akcyjna (including 2 which is are potentially serious) .

While 01Cyberaton Proenergy Spolka Akcyjna may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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This article by Simply Wall St is general in nature. 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.
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