Sanghvi Movers (NSE:SANGHVIMOV) Is Achieving High Returns On Its Capital

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. And in light of that, the trends we're seeing at Sanghvi Movers' (NSE:SANGHVIMOV) look very promising so lets take a look.

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

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Sanghvi Movers is:

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

0.20 = ₹2.4b ÷ (₹13b - ₹1.8b) (Based on the trailing twelve months to December 2023).

So, Sanghvi Movers has an ROCE of 20%. That's a fantastic return and not only that, it outpaces the average of 5.6% earned by companies in a similar industry.

See our latest analysis for Sanghvi Movers

Above you can see how the current ROCE for Sanghvi Movers compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Sanghvi Movers .

What The Trend Of ROCE Can Tell Us

Shareholders will be relieved that Sanghvi Movers has broken into profitability. While the business was unprofitable in the past, it's now turned things around and is earning 20% on its capital. While returns have increased, the amount of capital employed by Sanghvi Movers has remained flat over the period. With no noticeable increase in capital employed, it's worth knowing what the company plans on doing going forward in regards to reinvesting and growing the business. Because in the end, a business can only get so efficient.

The Key Takeaway

To bring it all together, Sanghvi Movers has done well to increase the returns it's generating from its capital employed. And a remarkable 826% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you want to continue researching Sanghvi Movers, you might be interested to know about the 2 warning signs that our analysis has discovered.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity.

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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.