We Like These Underlying Return On Capital Trends At Century Enka (NSE:CENTENKA)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. So on that note, Century Enka (NSE:CENTENKA) looks quite promising in regards to its trends of return on capital.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Century Enka is:

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

0.17 = ₹2.1b ÷ (₹14b - ₹1.3b) (Based on the trailing twelve months to September 2021).

So, Century Enka has an ROCE of 17%. On its own, that's a standard return, however it's much better than the 13% generated by the Luxury industry.

See our latest analysis for Century Enka

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

What Can We Tell From Century Enka's ROCE Trend?

Investors would be pleased with what's happening at Century Enka. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 17%. Basically the business is earning more per dollar of capital invested and in addition to that, 29% more capital is being employed now too. So we're very much inspired by what we're seeing at Century Enka thanks to its ability to profitably reinvest capital.

The Bottom Line On Century Enka's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Century Enka has. And with a respectable 74% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. 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.

While Century Enka looks impressive, no company is worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether CENTENKA is currently trading for a fair price.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.