Investors Could Be Concerned With PJP Makrum's (WSE:PJP) Returns On Capital
If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. In light of that, when we looked at PJP Makrum (WSE:PJP) and its ROCE trend, we weren't exactly thrilled.
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 PJP Makrum, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.044 = zł8.3m ÷ (zł426m - zł238m) (Based on the trailing twelve months to September 2025).
So, PJP Makrum has an ROCE of 4.4%. Ultimately, that's a low return and it under-performs the Building industry average of 6.4%.
Check out our latest analysis for PJP Makrum
In the above chart we have measured PJP Makrum's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for PJP Makrum .
What Can We Tell From PJP Makrum's ROCE Trend?
When we looked at the ROCE trend at PJP Makrum, we didn't gain much confidence. Around five years ago the returns on capital were 13%, but since then they've fallen to 4.4%. Meanwhile, the business is utilizing more capital but this hasn't moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It may take some time before the company starts to see any change in earnings from these investments.
On a side note, PJP Makrum's current liabilities are still rather high at 56% of total assets. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.
In Conclusion...
To conclude, we've found that PJP Makrum is reinvesting in the business, but returns have been falling. Unsurprisingly, the stock has only gained 9.7% over the last five years, which potentially indicates that investors are accounting for this going forward. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.
On a final note, we've found 5 warning signs for PJP Makrum that we think you should be aware of.
While PJP Makrum 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.