There's Been No Shortage Of Growth Recently For KAMAZ Publicly Traded's (MCX:KMAZ) Returns On Capital

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, KAMAZ Publicly Traded (MCX:KMAZ) looks quite promising in regards to its trends of return on capital.

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 KAMAZ Publicly Traded is:

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 9.3% average generated by the Machinery industry.

See 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'd like to look at how KAMAZ Publicly Traded has performed in the past in other metrics, you can view 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. About five years ago the company was generating losses but things have turned around because it's now earning 9.8% on its capital. And unsurprisingly, like most companies trying to break into the black, KAMAZ Publicly Traded is utilizing 92% more capital than it was five years ago. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

Another thing to note, KAMAZ Publicly Traded has a high ratio of current liabilities to total assets of 42%. 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. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

The Bottom Line

Overall, KAMAZ Publicly Traded gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if KAMAZ Publicly Traded can keep these trends up, it could have a bright future ahead.

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 is a bit concerning!) that you should know about.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.
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