The Returns On Capital At Antony Waste Handling Cell (NSE:AWHCL) Don't Inspire Confidence

What trends should we look for it we want to identify stocks that can multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. However, after investigating Antony Waste Handling Cell (NSE:AWHCL), we don't think it's current trends fit the mold of a multi-bagger.

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

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the 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)

0.094 = ₹1.1b ÷ (₹15b - ₹3.4b) (Based on the trailing twelve months to September 2024).

Therefore, Antony Waste Handling Cell has an ROCE of 9.4%. In absolute terms, that's a low return and it also under-performs the Commercial Services industry average of 15%.

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're interested, you can view the analysts predictions in 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. Over the last five years, returns on capital have decreased to 9.4% from 19% five years ago. 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.

The Bottom Line On Antony Waste Handling Cell's ROCE

Bringing it all together, while we're somewhat encouraged by Antony Waste Handling Cell's reinvestment in its own business, we're aware that returns are shrinking. Investors must think there's better things to come because the stock has knocked it out of the park, delivering a 112% gain to shareholders who have held over the last three years. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

On a final note, we've found 1 warning sign for Antony Waste Handling Cell that we think you should be aware of.

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.