Feedback on Capital Paint A bright future for Polymetal International (LON: POLY)
Did you know that certain financial measures can provide clues about a potential multi-bagger? Generally, we will want to notice a growing trend return on capital employed (ROCE) and at the same time, a based capital employed. If you see this, it usually means it’s a company with a great business model and plenty of profitable reinvestment opportunities. And in light of this, the trends that we are observing at Polymetal International (LON: POLY) look very promising, so let’s take a look.
Return on capital employed (ROCE): what is it?
Just to clarify if you’re not sure, ROCE is a measure of the pre-tax income (as a percentage) that a business earns on the capital invested in its business. The formula for this calculation on Polymetal International is:
Return on capital employed = Profit before interest and taxes (EBIT) Ã· (Total assets – Current liabilities)
0.39 = $ 1.5 billion Ã· ($ 4.4 billion – $ 632 million) (Based on the last twelve months up to December 2020).
Therefore, Polymetal International has a ROCE of 39%. This is a fantastic return and not only that, it exceeds the 14% average earned by companies in a similar industry.
In the graph above, we measured Polymetal International’s past ROCE against its past performance, but the future is arguably more important. If you’d like to see what analysts are forecasting for the future, you should check out our free report for Polymetal International.
What the ROCE trend can tell us
The trends that we have noticed at Polymetal International are rather reassuring. Figures show that over the past five years, returns on capital employed have increased significantly to 39%. Basically the business earns more per dollar of capital invested and on top of that 128% more capital is also used. Increasing returns on an increasing amount of capital are common among multi-baggers and that is why we are impressed.
The result of the ROCE of Polymetal International
To sum up, Polymetal International has proven that it can reinvest in the business and generate higher returns on that capital employed, which is great. Given that the stock has returned 162% to shareholders over the past five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your while to check if these trends will continue.
On a separate note we have found 2 warning signs for Polymetal International you will probably want to know more.
If you’d like to see other companies driving high returns, check out our free List of high yielding companies with strong balance sheets here.
This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
Do you have any feedback on this item? Are you worried about the content? Get in touch with us directly. You can also send an email to the editorial team (at) simplywallst.com.