Shivalic Power Control (NSE:SPCL) Is Experiencing Growth In Returns On Capital

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should 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. 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 Shivalic Power Control (NSE:SPCL) and its trend of ROCE, we really liked what we saw.

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What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Shivalic Power Control is:

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

0.15 = ₹173m ÷ (₹1.3b - ₹116m) (Based on the trailing twelve months to March 2025).

Thus, Shivalic Power Control has an ROCE of 15%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Electrical industry average of 18%.

See our latest analysis for Shivalic Power Control

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

What Can We Tell From Shivalic Power Control's ROCE Trend?

Shivalic Power Control is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 15%. Basically the business is earning more per dollar of capital invested and in addition to that, 240% more capital is being employed now too. So we're very much inspired by what we're seeing at Shivalic Power Control thanks to its ability to profitably reinvest capital.

One more thing to note, Shivalic Power Control has decreased current liabilities to 9.0% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. Therefore we can rest assured that the growth in ROCE is a result of the business' fundamental improvements, rather than a cooking class featuring this company's books.

The Bottom Line

In summary, it's great to see that Shivalic Power Control can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And since the stock has fallen 55% over the last year, there might be an opportunity here. So researching this company further and determining whether or not these trends will continue seems justified.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 2 warning signs for Shivalic Power Control (of which 1 makes us a bit uncomfortable!) that you should know about.

While Shivalic Power Control 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.