Investors Met With Slowing Returns on Capital At Fiem Industries (NSE:FIEMIND)

Published
June 02, 2022
NSEI:FIEMIND
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Did you know there are some financial metrics that can provide clues of a potential 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, the ROCE of Fiem Industries (NSE:FIEMIND) looks decent, right now, so lets see what the trend of returns can tell us.

What is 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. Analysts use this formula to calculate it for Fiem Industries:

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

0.19 = ₹1.3b ÷ (₹9.3b - ₹2.7b) (Based on the trailing twelve months to December 2021).

Therefore, Fiem Industries has an ROCE of 19%. In absolute terms, that's a satisfactory return, but compared to the Auto Components industry average of 11% it's much better.

View our latest analysis for Fiem Industries

roce
NSEI:FIEMIND Return on Capital Employed June 2nd 2022

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 Fiem Industries' past further, check out this free graph of past earnings, revenue and cash flow.

So How Is Fiem Industries' ROCE Trending?

While the returns on capital are good, they haven't moved much. The company has consistently earned 19% for the last five years, and the capital employed within the business has risen 37% in that time. 19% is a pretty standard return, and it provides some comfort knowing that Fiem Industries has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

What We Can Learn From Fiem Industries' ROCE

To sum it up, Fiem Industries has simply been reinvesting capital steadily, at those decent rates of return. In light of this, the stock has only gained 31% over the last five years for shareholders who have owned the stock in this period. So to determine if Fiem Industries is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.

One more thing, we've spotted 1 warning sign facing Fiem Industries that you might find interesting.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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About NSEI:FIEMIND

Fiem Industries

Fiem Industries Limited manufactures and supplies automotive lighting and signaling equipment, rear view mirrors, and sheet metal and plastic parts in India and internationally.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation2
Future Growth0
Past Performance5
Financial Health6
Dividends4

Read more about these checks in the individual report sections or in our analysis model.

Flawless balance sheet with solid track record and pays a dividend.