Returns on Capital Paint A Bright Future For Debock Industries (NSE:DIL)

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. 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, the ROCE of Debock Industries (NSE:DIL) looks great, so lets see what the trend can tell us.

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. The formula for this calculation on Debock Industries is:

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

0.44 = ₹379m ÷ (₹1.1b - ₹287m) (Based on the trailing twelve months to December 2022).

So, Debock Industries has an ROCE of 44%. That's a fantastic return and not only that, it outpaces the average of 16% earned by companies in a similar industry.

View our latest analysis for Debock Industries

Historical performance is a great place to start when researching a stock so above you can see the gauge for Debock Industries' ROCE against it's prior returns. If you'd like to look at how Debock Industries has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For Debock Industries Tell Us?

Investors would be pleased with what's happening at Debock Industries. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 44%. 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 268%. So we're very much inspired by what we're seeing at Debock Industries thanks to its ability to profitably reinvest capital.

The Bottom Line

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Debock Industries has. And a remarkable 400% total return over the last three years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

One final note, you should learn about the 3 warning signs we've spotted with Debock Industries (including 2 which are a bit concerning) .

High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.