BEW Engineering (NSE:BEWLTD) Has Some Way To Go To Become A Multi-Bagger

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. That's why when we briefly looked at BEW Engineering's (NSE:BEWLTD) ROCE trend, we were pretty happy with what we saw.

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Understanding 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 BEW Engineering:

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

0.17 = ₹253m ÷ (₹2.0b - ₹482m) (Based on the trailing twelve months to September 2024).

Thus, BEW Engineering has an ROCE of 17%. That's a relatively normal return on capital, and it's around the 16% generated by the Machinery industry.

View our latest analysis for BEW Engineering

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 BEW Engineering's past further, check out this free graph covering BEW Engineering's past earnings, revenue and cash flow .

What Can We Tell From BEW Engineering's ROCE Trend?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has employed 592% more capital in the last five years, and the returns on that capital have remained stable at 17%. 17% is a pretty standard return, and it provides some comfort knowing that BEW Engineering 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.

On a side note, BEW Engineering has done well to reduce current liabilities to 25% of total assets over the last five years. This can eliminate some of the risks inherent in the operations because the business has less outstanding obligations to their suppliers and or short-term creditors than they did previously.

In Conclusion...

In the end, BEW Engineering has proven its ability to adequately reinvest capital at good rates of return. However, despite the favorable fundamentals, the stock has fallen 22% over the last three years, so there might be an opportunity here for astute investors. That's why we think it'd be worthwhile to look further into this stock given the fundamentals are appealing.

One final note, you should learn about the 2 warning signs we've spotted with BEW Engineering (including 1 which makes us a bit uncomfortable) .

While BEW Engineering may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.