Returns At Tara Chand Logistic Solutions (NSE:TARACHAND) Appear To Be Weighed Down

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. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. That's why when we briefly looked at Tara Chand Logistic Solutions' (NSE:TARACHAND) ROCE trend, we were pretty happy with what we saw.

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. The formula for this calculation on Tara Chand Logistic Solutions is:

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

0.16 = ₹340m ÷ (₹2.6b - ₹505m) (Based on the trailing twelve months to December 2024).

So, Tara Chand Logistic Solutions has an ROCE of 16%. On its own, that's a standard return, however it's much better than the 6.6% generated by the Trade Distributors industry.

View our latest analysis for Tara Chand Logistic Solutions

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 Tara Chand Logistic Solutions' past further, check out this free graph covering Tara Chand Logistic Solutions' past earnings, revenue and cash flow.

So How Is Tara Chand Logistic Solutions' ROCE Trending?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has employed 108% more capital in the last five years, and the returns on that capital have remained stable at 16%. 16% is a pretty standard return, and it provides some comfort knowing that Tara Chand Logistic Solutions has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

In Conclusion...

In the end, Tara Chand Logistic Solutions has proven its ability to adequately reinvest capital at good rates of return. And long term investors would be thrilled with the 877% return they've received over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

Tara Chand Logistic Solutions does have some risks though, and we've spotted 3 warning signs for Tara Chand Logistic Solutions that you might be interested in.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.