Investors Will Want PD Omoljica AD u Restrukturiranju's (BELEX:OMOL) Growth In ROCE To Persist

What trends should we look for it we want to identify stocks that can multiply in value over the long term? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Speaking of which, we noticed some great changes in PD Omoljica AD u Restrukturiranju's (BELEX:OMOL) returns on capital, so let's have a look.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on PD Omoljica AD u Restrukturiranju is:

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

0.0042 = дин6.3m ÷ (дин1.5b - дин25m) (Based on the trailing twelve months to December 2021).

So, PD Omoljica AD u Restrukturiranju has an ROCE of 0.4%. In absolute terms, that's a low return and it also under-performs the Food industry average of 8.6%.

View our latest analysis for PD Omoljica AD u Restrukturiranju

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 want to delve into the historical earnings, revenue and cash flow of PD Omoljica AD u Restrukturiranju, check out these free graphs here.

So How Is PD Omoljica AD u Restrukturiranju's ROCE Trending?

We're delighted to see that PD Omoljica AD u Restrukturiranju is reaping rewards from its investments and has now broken into profitability. The company was generating losses two years ago, but has managed to turn it around and as we saw earlier is now earning 0.4%, 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. That being said, while an increase in efficiency is no doubt appealing, it'd be helpful to know if the company does have any investment plans going forward. So if you're looking for high growth, you'll want to see a business's capital employed also increasing.

In Conclusion...

As discussed above, PD Omoljica AD u Restrukturiranju appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. Since the stock has returned a staggering 284% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

PD Omoljica AD u Restrukturiranju does come with some risks though, we found 5 warning signs in our investment analysis, and 3 of those are concerning...

While PD Omoljica AD u Restrukturiranju isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.