Antony Waste Handling Cell (NSE:AWHCL) Could Be Struggling To Allocate Capital

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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Having said that, from a first glance at Antony Waste Handling Cell (NSE:AWHCL) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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. Analysts use this formula to calculate it for Antony Waste Handling Cell:

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

0.11 = ₹1.3b ÷ (₹15b - ₹3.1b) (Based on the trailing twelve months to March 2024).

Thus, Antony Waste Handling Cell has an ROCE of 11%. In isolation, that's a pretty standard return but against the Commercial Services industry average of 16%, it's not as good.

See our latest analysis for Antony Waste Handling Cell

Above you can see how the current ROCE for Antony Waste Handling Cell compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Antony Waste Handling Cell .

How Are Returns Trending?

On the surface, the trend of ROCE at Antony Waste Handling Cell doesn't inspire confidence. To be more specific, ROCE has fallen from 17% over the last five years. However it looks like Antony Waste Handling Cell might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It may take some time before the company starts to see any change in earnings from these investments.

What We Can Learn From Antony Waste Handling Cell's ROCE

To conclude, we've found that Antony Waste Handling Cell is reinvesting in the business, but returns have been falling. Since the stock has gained an impressive 69% over the last three years, investors must think there's better things to come. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.

On a separate note, we've found 1 warning sign for Antony Waste Handling Cell you'll probably want to know about.

While Antony Waste Handling Cell 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.

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