Returns At KAMAZ Publicly Traded (MCX:KMAZ) Are On The Way Up

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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. With that in mind, we've noticed some promising trends at KAMAZ Publicly Traded (MCX:KMAZ) so let's look a bit deeper.

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. To calculate this metric for KAMAZ Publicly Traded, this is the formula:

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

0.098 = ₽13b ÷ (₽228b - ₽96b) (Based on the trailing twelve months to December 2020).

Thus, KAMAZ Publicly Traded has an ROCE of 9.8%. On its own, that's a low figure but it's around the 8.8% average generated by the Machinery industry.

Check out our latest analysis for KAMAZ Publicly Traded

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

What Can We Tell From KAMAZ Publicly Traded's ROCE Trend?

KAMAZ Publicly Traded has recently broken into profitability so their prior investments seem to be paying off. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 9.8% on its capital. Not only that, but the company is utilizing 92% more capital than before, but that's to be expected from a company trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

On a separate but related note, it's important to know that KAMAZ Publicly Traded has a current liabilities to total assets ratio of 42%, which we'd consider pretty high. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

The Bottom Line

To the delight of most shareholders, KAMAZ Publicly Traded has now broken into profitability. And with a respectable 97% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 2 warning signs for KAMAZ Publicly Traded (of which 1 makes us a bit uncomfortable!) that you should know about.

While KAMAZ Publicly Traded 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. 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.
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