Returns On Capital At Naftna Industrija Srbije a.d (BELEX:NIIS) Have Stalled

There are a few key trends to look for if we want to identify the next multi-bagger. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Having said that, from a first glance at Naftna Industrija Srbije a.d (BELEX:NIIS) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

What is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Naftna Industrija Srbije a.d:

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

0.083 = дин29b ÷ (дин411b - дин63b) (Based on the trailing twelve months to December 2021).

So, Naftna Industrija Srbije a.d has an ROCE of 8.3%. In absolute terms, that's a low return but it's around the Oil and Gas industry average of 8.8%.

View our latest analysis for Naftna Industrija Srbije a.d

Above you can see how the current ROCE for Naftna Industrija Srbije a.d compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Naftna Industrija Srbije a.d.

What Can We Tell From Naftna Industrija Srbije a.d's ROCE Trend?

There hasn't been much to report for Naftna Industrija Srbije a.d'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. So don't be surprised if Naftna Industrija Srbije a.d doesn't end up being a multi-bagger in a few years time. This probably explains why Naftna Industrija Srbije a.d is paying out 37% of its income to shareholders in the form of dividends. Given the business isn't reinvesting in itself, it makes sense to distribute a portion of earnings among shareholders.

Our Take On Naftna Industrija Srbije a.d's ROCE

We can conclude that in regards to Naftna Industrija Srbije a.d's returns on capital employed and the trends, there isn't much change to report on. Since the stock has declined 24% over the last five years, investors may not be too optimistic on this trend improving either. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.

If you're still interested in Naftna Industrija Srbije a.d it's worth checking out our FREE intrinsic value approximation to see if it's trading at an attractive price in other respects.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.