Investors Should Be Encouraged By Goldiam International's (NSE:GOLDIAM) Returns On Capital

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. And in light of that, the trends we're seeing at Goldiam International's (NSE:GOLDIAM) look very promising so lets take a look.

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What Is Return On Capital Employed (ROCE)?

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 Goldiam International is:

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

0.21 = ₹1.4b ÷ (₹8.0b - ₹1.2b) (Based on the trailing twelve months to December 2024).

Thus, Goldiam International has an ROCE of 21%. In absolute terms that's a great return and it's even better than the Luxury industry average of 12%.

View our latest analysis for Goldiam International

Historical performance is a great place to start when researching a stock so above you can see the gauge for Goldiam International's ROCE against it's prior returns. If you'd like to look at how Goldiam International has performed in the past in other metrics, you can view this free graph of Goldiam International's past earnings, revenue and cash flow .

What Can We Tell From Goldiam International's ROCE Trend?

We like the trends that we're seeing from Goldiam International. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 21%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 68%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Bottom Line On Goldiam International's ROCE

In summary, it's great to see that Goldiam International can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And a remarkable 1,604% 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.

If you'd like to know more about Goldiam International, we've spotted 2 warning signs, and 1 of them is concerning.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high 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.