Yahoo Finance Here's What To Make Of Uzin Utz's (ETR:UZU) Decelerating Rates Of Return
To find a multi-bagger stock, what are the underlying trends we should look for in a business? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. That's why when we briefly looked at Uzin Utz's (ETR:UZU) ROCE trend, we were pretty happy with what we saw.
What Is Return On Capital Employed (ROCE)?
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Uzin Utz, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.11 = €34m ÷ (€420m - €98m) (Based on the trailing twelve months to December 2023).
Therefore, Uzin Utz has an ROCE of 11%. In absolute terms, that's a satisfactory return, but compared to the Chemicals industry average of 7.5% it's much better.
View our latest analysis for Uzin Utz
Above you can see how the current ROCE for Uzin Utz compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Uzin Utz for free.
What The Trend Of ROCE Can Tell Us
The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has employed 40% more capital in the last five years, and the returns on that capital have remained stable at 11%. Since 11% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.
The Bottom Line
In the end, Uzin Utz has proven its ability to adequately reinvest capital at good rates of return. In light of this, the stock has only gained 6.9% over the last five years for shareholders who have owned the stock in this period. So to determine if Uzin Utz is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.
If you're still interested in Uzin Utz it's worth checking out our FREE intrinsic value approximation for UZU to see if it's trading at an attractive price in other respects.
While Uzin Utz isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
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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.
