Returns On Capital Signal Tricky Times Ahead For Exxaro Tiles (NSE:EXXARO)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. In light of that, when we looked at Exxaro Tiles (NSE:EXXARO) and its ROCE trend, we weren't exactly thrilled.

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

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Exxaro Tiles, this is the formula:

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

0.063 = ₹191m ÷ (₹4.9b - ₹1.9b) (Based on the trailing twelve months to June 2025).

Therefore, Exxaro Tiles has an ROCE of 6.3%. In absolute terms, that's a low return and it also under-performs the Building industry average of 16%.

Check out our latest analysis for Exxaro Tiles

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 Exxaro Tiles' past further, check out this free graph covering Exxaro Tiles' past earnings, revenue and cash flow.

So How Is Exxaro Tiles' ROCE Trending?

In terms of Exxaro Tiles' historical ROCE movements, the trend isn't fantastic. Over the last five years, returns on capital have decreased to 6.3% from 15% five years ago. However it looks like Exxaro Tiles might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

The Bottom Line

To conclude, we've found that Exxaro Tiles is reinvesting in the business, but returns have been falling. Since the stock has declined 35% over the last three years, investors may not be too optimistic on this trend improving either. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

Exxaro Tiles does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those is a bit unpleasant...

While Exxaro Tiles 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.