We Like These Underlying Return On Capital Trends At Ashima (NSE:ASHIMASYN)

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. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, we've noticed some promising trends at Ashima (NSE:ASHIMASYN) so let's look a bit deeper.

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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. To calculate this metric for Ashima, this is the formula:

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

0.011 = ₹46m ÷ (₹5.0b - ₹823m) (Based on the trailing twelve months to March 2025).

Therefore, Ashima has an ROCE of 1.1%. Ultimately, that's a low return and it under-performs the Luxury industry average of 9.7%.

View our latest analysis for Ashima

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'd like to look at how Ashima has performed in the past in other metrics, you can view this free graph of Ashima's past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

Ashima has recently broken into profitability so their prior investments seem to be paying off. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 1.1% on its capital. And unsurprisingly, like most companies trying to break into the black, Ashima is utilizing 73% more capital than it was five years ago. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

The Key Takeaway

Overall, Ashima gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. And a remarkable 372% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

Ashima does have some risks, we noticed 3 warning signs (and 1 which is potentially serious) we think you should know about.

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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.