The Returns At Coral India Finance and Housing (NSE:CORALFINAC) Aren't Growing

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. With that in mind, the ROCE of Coral India Finance and Housing (NSE:CORALFINAC) looks decent, right now, so lets see what the trend of returns can tell us.

We've discovered 3 warning signs about Coral India Finance and Housing. View them for free.

Return On Capital Employed (ROCE): What Is It?

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 Coral India Finance and Housing, this is the formula:

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

0.10 = ₹251m ÷ (₹2.5b - ₹30m) (Based on the trailing twelve months to December 2024).

So, Coral India Finance and Housing has an ROCE of 10%. In absolute terms, that's a pretty standard return but compared to the Construction industry average it falls behind.

View our latest analysis for Coral India Finance and Housing

Historical performance is a great place to start when researching a stock so above you can see the gauge for Coral India Finance and Housing's ROCE against it's prior returns. If you're interested in investigating Coral India Finance and Housing's past further, check out this free graph covering Coral India Finance and Housing's past earnings, revenue and cash flow.

How Are Returns Trending?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. Over the past five years, ROCE has remained relatively flat at around 10% and the business has deployed 93% more capital into its operations. Since 10% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. 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.

In Conclusion...

The main thing to remember is that Coral India Finance and Housing has proven its ability to continually reinvest at respectable rates of return. And the stock has done incredibly well with a 249% return over the last five years, so long term investors are no doubt ecstatic with that result. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

On a separate note, we've found 3 warning signs for Coral India Finance and Housing you'll probably want to know about.

While Coral India Finance and Housing isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.