Mladinska knjiga Zalozba d. d's (LJSE:MKZG) Returns On Capital Are Heading Higher

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding 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 Mladinska knjiga Zalozba d. d's (LJSE:MKZG) returns on capital, so let's have a look.

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What Is Return On Capital Employed (ROCE)?

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 Mladinska knjiga Zalozba d. d is:

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

0.035 = €1.7m ÷ (€67m - €17m) (Based on the trailing twelve months to December 2024).

So, Mladinska knjiga Zalozba d. d has an ROCE of 3.5%. Ultimately, that's a low return and it under-performs the Media industry average of 11%.

See our latest analysis for Mladinska knjiga Zalozba 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'd like to look at how Mladinska knjiga Zalozba d. d has performed in the past in other metrics, you can view this free graph of Mladinska knjiga Zalozba d. d's past earnings, revenue and cash flow.

What Does the ROCE Trend For Mladinska knjiga Zalozba d. d Tell Us?

While there are companies with higher returns on capital out there, we still find the trend at Mladinska knjiga Zalozba d. d promising. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 478% in that same time. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

Our Take On Mladinska knjiga Zalozba d. d's ROCE

In summary, we're delighted to see that Mladinska knjiga Zalozba d. d has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.