Investors Met With Slowing Returns on Capital At Asahi India Glass (NSE:ASAHIINDIA)

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Although, when we looked at Asahi India Glass (NSE:ASAHIINDIA), it didn't seem to tick all of these boxes.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

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. Analysts use this formula to calculate it for Asahi India Glass:

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

0.086 = ₹5.2b ÷ (₹79b - ₹18b) (Based on the trailing twelve months to September 2025).

Therefore, Asahi India Glass has an ROCE of 8.6%. In absolute terms, that's a low return and it also under-performs the Auto Components industry average of 14%.

Check out our latest analysis for Asahi India Glass

Above you can see how the current ROCE for Asahi India Glass compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Asahi India Glass for free.

What Can We Tell From Asahi India Glass' ROCE Trend?

The returns on capital haven't changed much for Asahi India Glass in recent years. The company has employed 150% more capital in the last five years, and the returns on that capital have remained stable at 8.6%. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

On a side note, Asahi India Glass has done well to reduce current liabilities to 23% of total assets over the last five years. Effectively suppliers now fund less of the business, which can lower some elements of risk.

The Bottom Line On Asahi India Glass' ROCE

In conclusion, Asahi India Glass has been investing more capital into the business, but returns on that capital haven't increased. Yet to long term shareholders the stock has gifted them an incredible 313% return in the last five years, so the market appears to be rosy about its future. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.

Asahi India Glass does have some risks though, and we've spotted 1 warning sign for Asahi India Glass that you might be interested in.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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

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.