Returns At Societatea Comerciala Unisem (BVB:UNISEM) Are On The Way Up

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. Speaking of which, we noticed some great changes in Societatea Comerciala Unisem's (BVB:UNISEM) returns on capital, so let's have a look.

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What Is 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. The formula for this calculation on Societatea Comerciala Unisem is:

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

0.0086 = RON399k ÷ (RON53m - RON7.2m) (Based on the trailing twelve months to December 2024).

Thus, Societatea Comerciala Unisem has an ROCE of 0.9%. Ultimately, that's a low return and it under-performs the Food industry average of 4.6%.

View our latest analysis for Societatea Comerciala Unisem

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 Societatea Comerciala Unisem has performed in the past in other metrics, you can view this free graph of Societatea Comerciala Unisem's past earnings, revenue and cash flow.

What Can We Tell From Societatea Comerciala Unisem's ROCE Trend?

Societatea Comerciala Unisem has broken into the black (profitability) and we're sure it's a sight for sore eyes. The company was generating losses five years ago, but has managed to turn it around and as we saw earlier is now earning 0.9%, which is always encouraging. On top of that, what's interesting is that the amount of capital being employed has remained steady, so the business hasn't needed to put any additional money to work to generate these higher returns. So while we're happy that the business is more efficient, just keep in mind that could mean that going forward the business is lacking areas to invest internally for growth. So if you're looking for high growth, you'll want to see a business's capital employed also increasing.

For the record though, there was a noticeable increase in the company's current liabilities over the period, so we would attribute some of the ROCE growth to that. Effectively this means that suppliers or short-term creditors are now funding 14% of the business, which is more than it was five years ago. Keep an eye out for future increases because when the ratio of current liabilities to total assets gets particularly high, this can introduce some new risks for the business.

What We Can Learn From Societatea Comerciala Unisem's ROCE

In summary, we're delighted to see that Societatea Comerciala Unisem has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Since the stock has returned a solid 13% to shareholders over the last year, it's fair to say investors are beginning to recognize these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you want to know some of the risks facing Societatea Comerciala Unisem we've found 5 warning signs (2 are concerning!) that you should be aware of before investing here.

While Societatea Comerciala Unisem 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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