Under The Bonnet, IMPOL SEVAL Valjaonica Aluminijuma a.d's (BELEX:IMPL) Returns Look Impressive

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in IMPOL SEVAL Valjaonica Aluminijuma a.d's (BELEX:IMPL) returns on capital, so let's have a look.

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. Analysts use this formula to calculate it for IMPOL SEVAL Valjaonica Aluminijuma a.d:

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

0.25 = дин2.9b ÷ (дин14b - дин2.4b) (Based on the trailing twelve months to December 2022).

Thus, IMPOL SEVAL Valjaonica Aluminijuma a.d has an ROCE of 25%. That's a fantastic return and not only that, it outpaces the average of 10% earned by companies in a similar industry.

Check out our latest analysis for IMPOL SEVAL Valjaonica Aluminijuma a.d

Historical performance is a great place to start when researching a stock so above you can see the gauge for IMPOL SEVAL Valjaonica Aluminijuma a.d's ROCE against it's prior returns. If you're interested in investigating IMPOL SEVAL Valjaonica Aluminijuma a.d's past further, check out this free graph covering IMPOL SEVAL Valjaonica Aluminijuma a.d's past earnings, revenue and cash flow.

The Trend Of ROCE

We like the trends that we're seeing from IMPOL SEVAL Valjaonica Aluminijuma a.d. Over the last five years, returns on capital employed have risen substantially to 25%. The amount of capital employed has increased too, by 41%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

On a related note, the company's ratio of current liabilities to total assets has decreased to 18%, which basically reduces it's funding from the likes of short-term creditors or suppliers. So this improvement in ROCE has come from the business' underlying economics, which is great to see.

In Conclusion...

In summary, it's great to see that IMPOL SEVAL Valjaonica Aluminijuma a.d can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Since the stock has returned a staggering 108% 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.

IMPOL SEVAL Valjaonica Aluminijuma a.d does come with some risks though, we found 4 warning signs in our investment analysis, and 1 of those shouldn't be ignored...

IMPOL SEVAL Valjaonica Aluminijuma a.d is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.