WODKAN Przedsiebiorstwo Wodociagów i Kanalizacji (WSE:WOD) Has Some Way To Go To Become A Multi-Bagger

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. In light of that, when we looked at WODKAN Przedsiebiorstwo Wodociagów i Kanalizacji (WSE:WOD) and its ROCE trend, we weren't exactly thrilled.

Understanding Return On Capital Employed (ROCE)

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 WODKAN Przedsiebiorstwo Wodociagów i Kanalizacji, this is the formula:

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

0.0069 = zł1.7m ÷ (zł253m - zł7.5m) (Based on the trailing twelve months to March 2022).

So, WODKAN Przedsiebiorstwo Wodociagów i Kanalizacji has an ROCE of 0.7%. In absolute terms, that's a low return and it also under-performs the Water Utilities industry average of 4.0%.

View our latest analysis for WODKAN Przedsiebiorstwo Wodociagów i Kanalizacji

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'd like to look at how WODKAN Przedsiebiorstwo Wodociagów i Kanalizacji has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For WODKAN Przedsiebiorstwo Wodociagów i Kanalizacji Tell Us?

Over the past five years, WODKAN Przedsiebiorstwo Wodociagów i Kanalizacji's ROCE and capital employed have both remained mostly flat. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So don't be surprised if WODKAN Przedsiebiorstwo Wodociagów i Kanalizacji doesn't end up being a multi-bagger in a few years time.

The Bottom Line

In a nutshell, WODKAN Przedsiebiorstwo Wodociagów i Kanalizacji 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 21% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

WODKAN Przedsiebiorstwo Wodociagów i Kanalizacji does have some risks though, and we've spotted 3 warning signs for WODKAN Przedsiebiorstwo Wodociagów i Kanalizacji that you might be interested in.

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.