Petrol d.d's (LJSE:PETG) Returns On Capital Are Heading Higher

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at Petrol d.d (LJSE:PETG) and its trend of ROCE, we really liked what we saw.

We check all companies for important risks. See what we found for Petrol d.d in our free report.

Return On Capital Employed (ROCE): What Is It?

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 Petrol d.d:

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

0.14 = €208m ÷ (€2.4b - €973m) (Based on the trailing twelve months to December 2024).

Therefore, Petrol d.d has an ROCE of 14%. In absolute terms, that's a satisfactory return, but compared to the Specialty Retail industry average of 9.7% it's much better.

See our latest analysis for Petrol d.d

Above you can see how the current ROCE for Petrol d.d compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Petrol d.d .

What Does the ROCE Trend For Petrol d.d Tell Us?

Investors would be pleased with what's happening at Petrol d.d. The data shows that returns on capital have increased substantially over the last five years to 14%. The amount of capital employed has increased too, by 20%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line

All in all, it's terrific to see that Petrol d.d is reaping the rewards from prior investments and is growing its capital base. And a remarkable 309% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation for PETG that compares the share price and estimated value.

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.

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

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.