Returns Are Gaining Momentum At Borosil (NSE:BOROLTD)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. With that in mind, we've noticed some promising trends at Borosil (NSE:BOROLTD) so let's look a bit deeper.

Return On Capital Employed (ROCE): What is it?

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. Analysts use this formula to calculate it for Borosil:

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

0.096 = ₹697m ÷ (₹8.6b - ₹1.3b) (Based on the trailing twelve months to June 2021).

Therefore, Borosil has an ROCE of 9.6%. In absolute terms, that's a low return and it also under-performs the Consumer Durables industry average of 14%.

See our latest analysis for Borosil

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 Borosil's past further, check out this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For Borosil Tell Us?

Borosil's ROCE growth is quite impressive. The figures show that over the last two years, ROCE has grown 100% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

Our Take On Borosil's ROCE

To bring it all together, Borosil has done well to increase the returns it's generating from its capital employed. Since the stock has returned a solid 50% to shareholders over the last year, it's fair to say investors are beginning to recognize these changes. In light of that, we think it's worth looking further into this stock because if Borosil can keep these trends up, it could have a bright future ahead.

If you'd like to know about the risks facing Borosil, we've discovered 1 warning sign that you should be aware of.

While Borosil 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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