Returns On Capital At Uzin Utz (ETR:UZU) Have Hit The Brakes
What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. That's why when we briefly looked at Uzin Utz's (ETR:UZU) ROCE trend, we were pretty happy with what we saw.
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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. The formula for this calculation on Uzin Utz is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.12 = €40m ÷ (€431m - €93m) (Based on the trailing twelve months to December 2024).
So, Uzin Utz has an ROCE of 12%. On its own, that's a standard return, however it's much better than the 6.2% generated by the Chemicals industry.
Check out our latest analysis for Uzin Utz
In the above chart we have measured Uzin Utz's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Uzin Utz .
While the current returns on capital are decent, they haven't changed much. The company has employed 38% more capital in the last five years, and the returns on that capital have remained stable at 12%. 12% is a pretty standard return, and it provides some comfort knowing that Uzin Utz has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.
To sum it up, Uzin Utz has simply been reinvesting capital steadily, at those decent rates of return. And given the stock has only risen 28% over the last five years, we'd suspect the market is beginning to recognize these trends. So because of the trends we're seeing, we'd recommend looking further into this stock to see if it has the makings of a multi-bagger.
Uzin Utz could be trading at an attractive price in other respects, so you might find our on our platform quite valuable.
While Uzin Utz 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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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.
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