Be Wary Of AC Spólka Akcyjna (WSE:ACG) And Its Returns On Capital

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. However, after briefly looking over the numbers, we don't think AC Spólka Akcyjna (WSE:ACG) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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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 AC Spólka Akcyjna is:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.12 = zł21m ÷ (zł254m - zł84m) (Based on the trailing twelve months to September 2025).

Thus, AC Spólka Akcyjna has an ROCE of 12%. On its own, that's a standard return, however it's much better than the 9.4% generated by the Auto Components industry.

View our latest analysis for AC Spólka Akcyjna

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating AC Spólka Akcyjna's past further, check out this free graph covering AC Spólka Akcyjna's past earnings, revenue and cash flow.

How Are Returns Trending?

On the surface, the trend of ROCE at AC Spólka Akcyjna doesn't inspire confidence. Over the last five years, returns on capital have decreased to 12% from 28% five years ago. Given the business is employing more capital while revenue has slipped, this is a bit concerning. If this were to continue, you might be looking at a company that is trying to reinvest for growth but is actually losing market share since sales haven't increased.

The Key Takeaway

From the above analysis, we find it rather worrisome that returns on capital and sales for AC Spólka Akcyjna have fallen, meanwhile the business is employing more capital than it was five years ago. Investors haven't taken kindly to these developments, since the stock has declined 19% from where it was five years ago. Unless there is a shift to a more positive trajectory in these metrics, we would look elsewhere.

One more thing: We've identified 3 warning signs with AC Spólka Akcyjna (at least 2 which are potentially serious) , and understanding them would certainly be useful.

While AC Spólka Akcyjna 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.