Globaltruck Management (MCX:GTRK) Will Be Hoping To Turn Its Returns On Capital Around

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. In light of that, when we looked at Globaltruck Management (MCX:GTRK) and its ROCE trend, we weren't exactly thrilled.

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

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. Analysts use this formula to calculate it for Globaltruck Management:

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

0.098 = ₽723m ÷ (₽9.9b - ₽2.6b) (Based on the trailing twelve months to June 2020).

So, Globaltruck Management has an ROCE of 9.8%. In absolute terms, that's a low return, but it's much better than the Transportation industry average of 6.6%.

View our latest analysis for Globaltruck Management

In the above chart we have measured Globaltruck Management's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Globaltruck Management here for free.

What Does the ROCE Trend For Globaltruck Management Tell Us?

On the surface, the trend of ROCE at Globaltruck Management doesn't inspire confidence. To be more specific, ROCE has fallen from 17% over the last five years. Meanwhile, the business is utilizing more capital but this hasn't moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It may take some time before the company starts to see any change in earnings from these investments.

The Key Takeaway

In summary, Globaltruck Management is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. It seems that investors have little hope of these trends getting any better and that may have partly contributed to the stock collapsing 71% in the last three years. Therefore based on the analysis done in this article, we don't think Globaltruck Management has the makings of a multi-bagger.

If you want to know some of the risks facing Globaltruck Management we've found 5 warning signs (1 shouldn't be ignored!) that you should be aware of before investing here.

While Globaltruck Management 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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