Returns At Hilton Metal Forging (NSE:HILTON) Appear To Be Weighed Down

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Although, when we looked at Hilton Metal Forging (NSE:HILTON), it didn't seem to tick all of these boxes.

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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. To calculate this metric for Hilton Metal Forging, this is the formula:

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

0.061 = ₹80m ÷ (₹2.2b - ₹909m) (Based on the trailing twelve months to March 2025).

Thus, Hilton Metal Forging has an ROCE of 6.1%. In absolute terms, that's a low return and it also under-performs the Machinery industry average of 16%.

View our latest analysis for Hilton Metal Forging

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

The Trend Of ROCE

In terms of Hilton Metal Forging's historical ROCE trend, it doesn't exactly demand attention. The company has employed 62% more capital in the last five years, and the returns on that capital have remained stable at 6.1%. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

On a separate but related note, it's important to know that Hilton Metal Forging has a current liabilities to total assets ratio of 41%, which we'd consider pretty high. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

The Bottom Line

In conclusion, Hilton Metal Forging has been investing more capital into the business, but returns on that capital haven't increased. Investors must think there's better things to come because the stock has knocked it out of the park, delivering a 540% gain to shareholders who have held over the last five years. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.

If you want to know some of the risks facing Hilton Metal Forging we've found 3 warning signs (2 can't be ignored!) that you should be aware of before investing here.

While Hilton Metal Forging 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.