Pasupati Acrylon (NSE:PASUPTAC) Is Experiencing Growth In Returns On Capital

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. Speaking of which, we noticed some great changes in Pasupati Acrylon's (NSE:PASUPTAC) returns on capital, so let's have a look.

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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. The formula for this calculation on Pasupati Acrylon is:

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

0.06 = ₹294m ÷ (₹6.0b - ₹1.1b) (Based on the trailing twelve months to June 2025).

So, Pasupati Acrylon has an ROCE of 6.0%. Ultimately, that's a low return and it under-performs the Luxury industry average of 10%.

View our latest analysis for Pasupati Acrylon

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

What Can We Tell From Pasupati Acrylon's ROCE Trend?

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. The data shows that returns on capital have increased substantially over the last five years to 6.0%. 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 144%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

One more thing to note, Pasupati Acrylon has decreased current liabilities to 18% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. So this improvement in ROCE has come from the business' underlying economics, which is great to see.

The Key Takeaway

To sum it up, Pasupati Acrylon has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 56% return over the last three years. 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.

One more thing, we've spotted 2 warning signs facing Pasupati Acrylon that you might find interesting.

While Pasupati Acrylon 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.