Purv Flexipack (NSE:PURVFLEXI) Is Doing The Right Things To Multiply Its Share Price

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at Purv Flexipack (NSE:PURVFLEXI) and its trend of ROCE, we really liked what we saw.

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Understanding 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 Purv Flexipack, this is the formula:

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

0.13 = ₹296m ÷ (₹4.0b - ₹1.6b) (Based on the trailing twelve months to March 2025).

Therefore, Purv Flexipack has an ROCE of 13%. On its own, that's a standard return, however it's much better than the 7.8% generated by the Trade Distributors industry.

View our latest analysis for Purv Flexipack

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 Purv Flexipack's past further, check out this free graph covering Purv Flexipack's past earnings, revenue and cash flow.

What Does the ROCE Trend For Purv Flexipack Tell Us?

The trends we've noticed at Purv Flexipack are quite reassuring. The numbers show that in the last four years, the returns generated on capital employed have grown considerably to 13%. 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 168%. So we're very much inspired by what we're seeing at Purv Flexipack thanks to its ability to profitably reinvest capital.

On a side note, Purv Flexipack's current liabilities are still rather high at 41% of total assets. 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.

Our Take On Purv Flexipack's ROCE

All in all, it's terrific to see that Purv Flexipack is reaping the rewards from prior investments and is growing its capital base. Astute investors may have an opportunity here because the stock has declined 55% in the last year. With that in mind, we believe the promising trends warrant this stock for further investigation.

On a final note, we found 3 warning signs for Purv Flexipack (2 are a bit concerning) you should be aware of.

While Purv Flexipack 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.