Returns On Capital At Chalet Hotels (NSE:CHALET) Have Stalled

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, the ROCE of Chalet Hotels (NSE:CHALET) looks decent, right now, so lets see what the trend of returns can tell us.

We've discovered 2 warning signs about Chalet Hotels. View them for free.

What Is 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 Chalet Hotels:

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

0.12 = ₹5.2b ÷ (₹60b - ₹18b) (Based on the trailing twelve months to December 2024).

Thus, Chalet Hotels has an ROCE of 12%. On its own, that's a standard return, however it's much better than the 9.1% generated by the Hospitality industry.

Check out our latest analysis for Chalet Hotels

Above you can see how the current ROCE for Chalet Hotels compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Chalet Hotels .

What Does the ROCE Trend For Chalet Hotels Tell Us?

While the returns on capital are good, they haven't moved much. The company has employed 50% more capital in the last five years, and the returns on that capital have remained stable at 12%. 12% is a pretty standard return, and it provides some comfort knowing that Chalet Hotels 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.

The Bottom Line

The main thing to remember is that Chalet Hotels has proven its ability to continually reinvest at respectable rates of return. And long term investors would be thrilled with the 512% return they've received over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

Chalet Hotels does have some risks though, and we've spotted 2 warning signs for Chalet Hotels that you might be interested in.

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.

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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.