Trends At Bombay Burmah Trading Corporation (NSE:BBTC) Point To A Promising Future

There are a few key trends to look for if we want to identify the next multi-bagger. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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. Ergo, when we looked at the ROCE trends at Bombay Burmah Trading Corporation (NSE:BBTC), we liked what we saw.

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. The formula for this calculation on Bombay Burmah Trading Corporation is:

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

0.27 = ₹22b ÷ (₹114b - ₹32b) (Based on the trailing twelve months to June 2020).

Thus, Bombay Burmah Trading Corporation has an ROCE of 27%. In absolute terms that's a great return and it's even better than the Food industry average of 13%.

Check out our latest analysis for Bombay Burmah Trading Corporation

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 Bombay Burmah Trading Corporation's past further, check out this free graph of past earnings, revenue and cash flow.

The Trend Of ROCE

Bombay Burmah Trading Corporation deserves to be commended in regards to it's returns. The company has consistently earned 27% for the last five years, and the capital employed within the business has risen 189% in that time. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. If Bombay Burmah Trading Corporation can keep this up, we'd be very optimistic about its future.

The Bottom Line

In short, we'd argue Bombay Burmah Trading Corporation has the makings of a multi-bagger since its been able to compound its capital at very profitable rates of return. And the stock has done incredibly well with a 145% return over the last five years, so long term investors are no doubt ecstatic with that result. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

On a separate note, we've found 1 warning sign for Bombay Burmah Trading Corporation you'll probably want to know about.

High returns are a key ingredient to strong performance, so check out our free list ofstocks earning high returns on equity with solid balance sheets.

If you decide to trade Bombay Burmah Trading Corporation, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.