CIE Automotive India (NSE:CIEINDIA) Might Have The Makings Of A Multi-Bagger

What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, CIE Automotive India (NSE:CIEINDIA) looks quite promising in regards to its trends of return on capital.

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. To calculate this metric for CIE Automotive India, this is the formula:

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

0.18 = ₹12b ÷ (₹98b - ₹31b) (Based on the trailing twelve months to December 2023).

Therefore, CIE Automotive India has an ROCE of 18%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Auto Components industry average of 15%.

View our latest analysis for CIE Automotive India

In the above chart we have measured CIE Automotive India's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for CIE Automotive India .

What Can We Tell From CIE Automotive India's ROCE Trend?

CIE Automotive India's ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 39% in that same time. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

Our Take On CIE Automotive India's ROCE

To bring it all together, CIE Automotive India has done well to increase the returns it's generating from its capital employed. And a remarkable 123% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if CIE Automotive India can keep these trends up, it could have a bright future ahead.

One more thing to note, we've identified 2 warning signs with CIE Automotive India and understanding these should be part of your investment process.

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.

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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.