Himatsingka Seide (NSE:HIMATSEIDE) Has Some Way To Go To Become A Multi-Bagger

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. However, after investigating Himatsingka Seide (NSE:HIMATSEIDE), we don't think it's current trends fit the mold of a multi-bagger.

Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Himatsingka Seide:

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

0.12 = ₹4.2b ÷ (₹56b - ₹20b) (Based on the trailing twelve months to December 2023).

Thus, Himatsingka Seide has an ROCE of 12%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Luxury industry average of 11%.

View our latest analysis for Himatsingka Seide

In the above chart we have measured Himatsingka Seide's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Himatsingka Seide .

What Does the ROCE Trend For Himatsingka Seide Tell Us?

Over the past five years, Himatsingka Seide's ROCE and capital employed have both remained mostly flat. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect Himatsingka Seide to be a multi-bagger going forward.

The Bottom Line

In summary, Himatsingka Seide isn't compounding its earnings but is generating stable returns on the same amount of capital employed. And investors appear hesitant that the trends will pick up because the stock has fallen 26% in the last five years. On the whole, we aren't too inspired by the underlying trends and we think there may be better chances of finding a multi-bagger elsewhere.

If you want to continue researching Himatsingka Seide, you might be interested to know about the 2 warning signs that our analysis has discovered.

While Himatsingka Seide may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.