Investors Should Be Encouraged By Gabriel India's (NSE:GABRIEL) Returns On Capital

What trends should we look for it we want to identify stocks that can 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. And in light of that, the trends we're seeing at Gabriel India's (NSE:GABRIEL) look very promising so lets take a look.

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

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

0.24 = ₹2.7b ÷ (₹19b - ₹7.6b) (Based on the trailing twelve months to September 2024).

Thus, Gabriel India has an ROCE of 24%. That's a fantastic return and not only that, it outpaces the average of 14% earned by companies in a similar industry.

See our latest analysis for Gabriel India

Above you can see how the current ROCE for Gabriel India 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 Gabriel India for free.

So How Is Gabriel India's ROCE Trending?

The trends we've noticed at Gabriel India are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 24%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 75%. So we're very much inspired by what we're seeing at Gabriel India thanks to its ability to profitably reinvest capital.

The Bottom Line

In summary, it's great to see that Gabriel India can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Since the stock has returned a staggering 295% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

On a final note, we found 2 warning signs for Gabriel India (1 is a bit unpleasant) you should be aware of.

Gabriel India is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.