Igarashi Motors India (NSE:IGARASHI) Has More To Do To Multiply In Value Going Forward

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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. However, after investigating Igarashi Motors India (NSE:IGARASHI), we don't think it's current trends fit the mold of a multi-bagger.

We've discovered 1 warning sign about Igarashi Motors India. View them for free.

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 Igarashi Motors India:

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

0.095 = ₹490m ÷ (₹7.7b - ₹2.6b) (Based on the trailing twelve months to December 2024).

Therefore, Igarashi Motors India has an ROCE of 9.5%. Ultimately, that's a low return and it under-performs the Auto Components industry average of 15%.

Check out our latest analysis for Igarashi Motors India

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'd like to look at how Igarashi Motors India has performed in the past in other metrics, you can view this free graph of Igarashi Motors India's past earnings, revenue and cash flow.

The Trend Of ROCE

Over the past five years, Igarashi Motors India's ROCE and capital employed have both remained mostly flat. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect Igarashi Motors India to be a multi-bagger going forward.

In Conclusion...

In a nutshell, Igarashi Motors India has been trudging along with the same returns from the same amount of capital over the last five years. Yet to long term shareholders the stock has gifted them an incredible 110% 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.

Igarashi Motors India does have some risks though, and we've spotted 1 warning sign for Igarashi Motors India 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.

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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.