Grupa RECYKL (WSE:GRC) Is Looking To Continue Growing Its Returns On Capital
If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in Grupa RECYKL's (WSE:GRC) returns on capital, so let's have a look.
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 Grupa RECYKL is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.09 = zł17m ÷ (zł240m - zł51m) (Based on the trailing twelve months to September 2025).
So, Grupa RECYKL has an ROCE of 9.0%. Ultimately, that's a low return and it under-performs the Commercial Services industry average of 13%.
View our latest analysis for Grupa RECYKL
Historical performance is a great place to start when researching a stock so above you can see the gauge for Grupa RECYKL's ROCE against it's prior returns. If you're interested in investigating Grupa RECYKL's past further, check out this free graph covering Grupa RECYKL's past earnings, revenue and cash flow.
What Can We Tell From Grupa RECYKL's ROCE Trend?
While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. Over the last five years, returns on capital employed have risen substantially to 9.0%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 69%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.
In Conclusion...
To sum it up, Grupa RECYKL has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a staggering 121% to shareholders over the last five years, it looks like investors are recognizing these changes. 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.
If you want to continue researching Grupa RECYKL, you might be interested to know about the 3 warning signs that our analysis has discovered.
While Grupa RECYKL 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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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.