Returns On Capital At UNIOR Kovaska industrija d.d (LJSE:UKIG) Have Stalled

There are a few key trends to look for if we want to identify the next multi-bagger. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Having said that, from a first glance at UNIOR Kovaska industrija d.d (LJSE:UKIG) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

What is Return On Capital Employed (ROCE)?

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 UNIOR Kovaska industrija d.d:

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

0.04 = €11m ÷ (€369m - €95m) (Based on the trailing twelve months to March 2020).

Therefore, UNIOR Kovaska industrija d.d has an ROCE of 4.0%. Ultimately, that's a low return and it under-performs the Metals and Mining industry average of 8.8%.

View our latest analysis for UNIOR Kovaska industrija d.d

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 want to delve into the historical earnings, revenue and cash flow of UNIOR Kovaska industrija d.d, check out these free graphs here.

What Can We Tell From UNIOR Kovaska industrija d.d's ROCE Trend?

Over the past five years, UNIOR Kovaska industrija d.d's ROCE and capital employed have both remained mostly flat. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. So don't be surprised if UNIOR Kovaska industrija d.d doesn't end up being a multi-bagger in a few years time.

The Bottom Line

In a nutshell, UNIOR Kovaska industrija d.d has been trudging along with the same returns from the same amount of capital over the last five years. And investors appear hesitant that the trends will pick up because the stock has fallen 24% in the last five years. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

If you'd like to know more about UNIOR Kovaska industrija d.d, we've spotted 5 warning signs, and 2 of them are a bit unpleasant.

While UNIOR Kovaska industrija d.d isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

If you’re looking to trade a wide range of investments, 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.