The Return Trends At Kabra Extrusiontechnik (NSE:KABRAEXTRU) Look Promising

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? 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. So when we looked at Kabra Extrusiontechnik (NSE:KABRAEXTRU) and its trend of ROCE, we really liked what we saw.

What Is Return On Capital Employed (ROCE)?

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. The formula for this calculation on Kabra Extrusiontechnik is:

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

0.10 = ₹497m ÷ (₹7.4b - ₹2.6b) (Based on the trailing twelve months to September 2024).

Therefore, Kabra Extrusiontechnik has an ROCE of 10%. In absolute terms, that's a pretty standard return but compared to the Machinery industry average it falls behind.

Check out our latest analysis for Kabra Extrusiontechnik

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

So How Is Kabra Extrusiontechnik's ROCE Trending?

We like the trends that we're seeing from Kabra Extrusiontechnik. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 10%. The amount of capital employed has increased too, by 93%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

In Conclusion...

All in all, it's terrific to see that Kabra Extrusiontechnik is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 609% to shareholders over the last five years, it looks like investors are recognizing these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

One more thing, we've spotted 1 warning sign facing Kabra Extrusiontechnik that you might find interesting.

While Kabra Extrusiontechnik 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.