Stock Analysis

Slowing Rates Of Return At Unipro (MCX:UPRO) Leave Little Room For Excitement

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MISX:UPRO
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If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. With that in mind, the ROCE of Unipro (MCX:UPRO) looks decent, right now, so lets see what the trend of returns can tell us.

What is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Unipro:

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

0.17 = ₽21b ÷ (₽143b - ₽14b) (Based on the trailing twelve months to September 2021).

Therefore, Unipro has an ROCE of 17%. On its own, that's a standard return, however it's much better than the 4.6% generated by the Renewable Energy industry.

Check out our latest analysis for Unipro

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MISX:UPRO Return on Capital Employed November 4th 2021

Above you can see how the current ROCE for Unipro compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

What The Trend Of ROCE Can Tell Us

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has consistently earned 17% for the last five years, and the capital employed within the business has risen 24% in that time. 17% is a pretty standard return, and it provides some comfort knowing that Unipro has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

Our Take On Unipro's ROCE

To sum it up, Unipro has simply been reinvesting capital steadily, at those decent rates of return. And the stock has followed suit returning a meaningful 52% to shareholders over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

On a final note, we've found 1 warning sign for Unipro that we think you should be aware of.

While Unipro 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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