The Returns At Aqua Spólka Akcyjna (WSE:AQU) Aren't Growing

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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. Having said that, from a first glance at Aqua Spólka Akcyjna (WSE:AQU) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

We've discovered 2 warning signs about Aqua Spólka Akcyjna. View them for free.

Return On Capital Employed (ROCE): What Is It?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Aqua Spólka Akcyjna, this is the formula:

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

0.027 = zł13m ÷ (zł512m - zł36m) (Based on the trailing twelve months to December 2024).

So, Aqua Spólka Akcyjna has an ROCE of 2.7%. On its own that's a low return on capital but it's in line with the industry's average returns of 3.0%.

View our latest analysis for Aqua Spólka Akcyjna

Historical performance is a great place to start when researching a stock so above you can see the gauge for Aqua Spólka Akcyjna's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Aqua Spólka Akcyjna.

What Does the ROCE Trend For Aqua Spólka Akcyjna Tell Us?

There hasn't been much to report for Aqua Spólka Akcyjna's returns and its level of capital employed because both metrics have been steady for the past five years. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. With that in mind, unless investment picks up again in the future, we wouldn't expect Aqua Spólka Akcyjna to be a multi-bagger going forward.

The Bottom Line

In a nutshell, Aqua Spólka Akcyjna has been trudging along with the same returns from the same amount of capital over the last five years. And with the stock having returned a mere 6.8% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.

If you want to continue researching Aqua Spólka Akcyjna, you might be interested to know about the 2 warning signs that our analysis has discovered.

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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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.