D-Market Elektronik Hizmetler ve Ticaret (NASDAQ:HEPS) Is Looking To Continue Growing Its 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, we've noticed some promising trends at D-Market Elektronik Hizmetler ve Ticaret (NASDAQ:HEPS) so let's look a bit deeper.
Understanding Return On Capital Employed (ROCE)
Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for D-Market Elektronik Hizmetler ve Ticaret, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.17 = ₺735m ÷ (₺15b - ₺11b) (Based on the trailing twelve months to September 2023).
So, D-Market Elektronik Hizmetler ve Ticaret has an ROCE of 17%. In absolute terms, that's a satisfactory return, but compared to the Multiline Retail industry average of 10% it's much better.
Check out our latest analysis for D-Market Elektronik Hizmetler ve Ticaret
Above you can see how the current ROCE for D-Market Elektronik Hizmetler ve Ticaret compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.
The Trend Of ROCE
We're delighted to see that D-Market Elektronik Hizmetler ve Ticaret is reaping rewards from its investments and is now generating some pre-tax profits. The company was generating losses two years ago, but now it's earning 17% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, D-Market Elektronik Hizmetler ve Ticaret is utilizing 101% more capital than it was two years ago. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.
On a side note, D-Market Elektronik Hizmetler ve Ticaret's current liabilities are still rather high at 72% of total assets. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.
The Bottom Line
Long story short, we're delighted to see that D-Market Elektronik Hizmetler ve Ticaret's reinvestment activities have paid off and the company is now profitable. And with the stock having performed exceptionally well over the last year, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if D-Market Elektronik Hizmetler ve Ticaret can keep these trends up, it could have a bright future ahead.
One more thing, we've spotted 1 warning sign facing D-Market Elektronik Hizmetler ve Ticaret that you might find interesting.
While D-Market Elektronik Hizmetler ve Ticaret 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.
