Return Trends At Garware Technical Fibres (NSE:GARFIBRES) Aren't Appealing

If you're looking for a multi-bagger, there's a few things to 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, the ROCE of Garware Technical Fibres (NSE:GARFIBRES) looks decent, right now, so lets see what the trend of returns can tell us.

What Is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Garware Technical Fibres is:

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

0.19 = ₹2.5b ÷ (₹18b - ₹4.8b) (Based on the trailing twelve months to March 2024).

So, Garware Technical Fibres has an ROCE of 19%. On its own, that's a standard return, however it's much better than the 11% generated by the Luxury industry.

See our latest analysis for Garware Technical Fibres

Above you can see how the current ROCE for Garware Technical Fibres compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Garware Technical Fibres for free.

The Trend Of ROCE

While the returns on capital are good, they haven't moved much. The company has employed 85% more capital in the last five years, and the returns on that capital have remained stable at 19%. 19% is a pretty standard return, and it provides some comfort knowing that Garware Technical Fibres has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

Our Take On Garware Technical Fibres' ROCE

In the end, Garware Technical Fibres has proven its ability to adequately reinvest capital at good rates of return. And the stock has done incredibly well with a 248% return over the last five years, so long term investors are no doubt ecstatic with that result. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

While Garware Technical Fibres doesn't shine too bright in this respect, it's still worth seeing if the company is trading at attractive prices. You can find that out with our FREE intrinsic value estimation for GARFIBRES on our platform.

While Garware Technical Fibres 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.