Bang Overseas (NSE:BANG) Has Some Way To Go To Become A Multi-Bagger

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. However, after investigating Bang Overseas (NSE:BANG), we don't think it's current trends fit the mold of a multi-bagger.

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 Bang Overseas is:

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

0.071 = ₹71m ÷ (₹1.4b - ₹449m) (Based on the trailing twelve months to June 2022).

Thus, Bang Overseas has an ROCE of 7.1%. Ultimately, that's a low return and it under-performs the Luxury industry average of 14%.

See our latest analysis for Bang Overseas

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

What Can We Tell From Bang Overseas' ROCE Trend?

The returns on capital haven't changed much for Bang Overseas in recent years. The company has employed 23% more capital in the last five years, and the returns on that capital have remained stable at 7.1%. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

On a side note, Bang Overseas has done well to reduce current liabilities to 31% of total assets over the last five years. Effectively suppliers now fund less of the business, which can lower some elements of risk.

In Conclusion...

Long story short, while Bang Overseas has been reinvesting its capital, the returns that it's generating haven't increased. And with the stock having returned a mere 19% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

One more thing, we've spotted 1 warning sign facing Bang Overseas that you might find interesting.

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.