Is Kaluga Power Sale Company (MCX:KLSB) The Next Multi-Bagger?

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Kaluga Power Sale Company's (MCX:KLSB) 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. The formula for this calculation on Kaluga Power Sale Company is:

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

0.22 = ₽492m ÷ (₽6.1b - ₽3.9b) (Based on the trailing twelve months to June 2020).

So, Kaluga Power Sale Company has an ROCE of 22%. In absolute terms that's a great return and it's even better than the Renewable Energy industry average of 16%.

View our latest analysis for Kaluga Power Sale Company

Historical performance is a great place to start when researching a stock so above you can see the gauge for Kaluga Power Sale Company's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Kaluga Power Sale Company, check out these free graphs here.

How Are Returns Trending?

Kaluga Power Sale Company is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 22%. Basically the business is earning more per dollar of capital invested and in addition to that, 79% more capital is being employed now too. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

Another thing to note, Kaluga Power Sale Company has a high ratio of current liabilities to total assets of 63%. 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 On Kaluga Power Sale Company's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Kaluga Power Sale Company has. And since the stock has fallen 68% over the last five years, there might be an opportunity here. With that in mind, we believe the promising trends warrant this stock for further investigation.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 4 warning signs for Kaluga Power Sale Company (of which 1 is significant!) that you should know about.

High returns are a key ingredient to strong performance, so check out our free list ofstocks 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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