Uztel (BVB:UZT) capital returns rise

Did you know that there are financial metrics that can provide clues of a potential multi-bagger? Ideally, a business will show two trends; first growth to return to on capital employed (ROCE) and on the other hand, growth amount capital employed. Ultimately, this demonstrates that this is a company that reinvests its earnings at increasing rates of return. Speaking of which, we’ve noticed big changes in from Uztel (BVB:UZT) returns to capital, so let’s take a look.

What is return on capital employed (ROCE)?

Just to clarify if you’re not sure, ROCE is a measure of the pre-tax income (as a percentage) that a business earns on the capital invested in its business. To calculate this metric for Uztel, here is the formula:

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

0.014 = RON809k ÷ (RON89m – RON31m) (Based on the last twelve months to December 2021).

So, Uztel posted a ROCE of 1.4%. Ultimately, that’s a poor performer, and it’s below the energy services industry average of 5.5%.

See our latest analysis for Uztel

BVB:UZT Return on Capital Employed March 14, 2022

Although the past is not indicative of the future, it can be useful to know the historical performance of a company, which is why we have this graph above. If you want to investigate more about Uztel’s past, check out this free chart of past profits, revenue and cash flow.

The ROCE trend

We are delighted to see that Uztel is reaping the rewards of its investments and is now profitable. Historically, the company generated losses, but as we can see from the latest figures referenced above, it now earns 1.4% on its capital employed. In terms of capital employed, Uztel is using 34% less capital than five years ago, which at first glance may indicate that the company has become more efficient in generating these returns. The reduction could indicate that the company is selling some assets and, given the rise in yields, it appears to be selling the good ones.

By the way, we noticed that the improvement in ROCE seems to be partly fueled by an increase in current liabilities. Essentially, the company now has suppliers or short-term creditors funding about 35% of its operations, which is not ideal. It’s worth keeping an eye on this because as the percentage of current liabilities to total assets increases, certain aspects of risk also increase.

In conclusion…

In a nutshell, we are delighted to see that Uztel was able to generate higher returns with less capital. Given that the stock has fallen 38% in the last five years, it could be a good investment if the valuation and other metrics are also attractive. That said, research into the company’s current valuation metrics and future prospects seems appropriate.

On a separate note, we found 1 warning sign for Uztel you will probably want to know more.

If you want to look for strong companies with excellent earnings, check out this free list of companies with strong balance sheets and impressive returns on equity.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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