We Like These Underlying Trends At Interregional Distribution Grid Company of Siberia (MCX:MRKS)

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, Interregional Distribution Grid Company of Siberia (MCX:MRKS) looks quite promising in regards to its trends of return on capital.

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. The formula for this calculation on Interregional Distribution Grid Company of Siberia is:

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

0.065 = ₽3.6b ÷ (₽75b - ₽20b) (Based on the trailing twelve months to September 2020).

Thus, Interregional Distribution Grid Company of Siberia has an ROCE of 6.5%. On its own, that's a low figure but it's around the 7.7% average generated by the Electric Utilities industry.

See our latest analysis for Interregional Distribution Grid Company of Siberia

In the above chart we have measured Interregional Distribution Grid Company of Siberia's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Interregional Distribution Grid Company of Siberia.

So How Is Interregional Distribution Grid Company of Siberia's ROCE Trending?

We're glad to see that ROCE is heading in the right direction, even if it is still low at the moment. Over the last five years, returns on capital employed have risen substantially to 6.5%. The amount of capital employed has increased too, by 118%. So we're very much inspired by what we're seeing at Interregional Distribution Grid Company of Siberia thanks to its ability to profitably reinvest capital.

One more thing to note, Interregional Distribution Grid Company of Siberia has decreased current liabilities to 26% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance.

What We Can Learn From Interregional Distribution Grid Company of Siberia's ROCE

To sum it up, Interregional Distribution Grid Company of Siberia has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a staggering 817% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you want to continue researching Interregional Distribution Grid Company of Siberia, you might be interested to know about the 1 warning sign that our analysis has discovered.

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.

If you’re looking to trade Interregional Distribution Grid Company of Siberia, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.