Chelyabinsk plant of the profiled steel decking (MCX:PRFN) Is Looking To Continue Growing Its Returns On Capital

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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. Speaking of which, we noticed some great changes in Chelyabinsk plant of the profiled steel decking's (MCX:PRFN) returns on capital, so let's have a look.

Return On Capital Employed (ROCE): What is it?

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 Chelyabinsk plant of the profiled steel decking, this is the formula:

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

0.015 = ₽169m ÷ (₽13b - ₽1.9b) (Based on the trailing twelve months to December 2020).

So, Chelyabinsk plant of the profiled steel decking has an ROCE of 1.5%. In absolute terms, that's a low return and it also under-performs the Metals and Mining industry average of 8.4%.

Check out our latest analysis for Chelyabinsk plant of the profiled steel decking

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're interested in investigating Chelyabinsk plant of the profiled steel decking's past further, check out this free graph of past earnings, revenue and cash flow.

How Are Returns Trending?

While there are companies with higher returns on capital out there, we still find the trend at Chelyabinsk plant of the profiled steel decking promising. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 53% over the last five years. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

The Bottom Line On Chelyabinsk plant of the profiled steel decking's ROCE

To bring it all together, Chelyabinsk plant of the profiled steel decking has done well to increase the returns it's generating from its capital employed. Given the stock has declined 45% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. With that in mind, we believe the promising trends warrant this stock for further investigation.

Chelyabinsk plant of the profiled steel decking does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those is concerning...

While Chelyabinsk plant of the profiled steel decking may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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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