Apeejay Surrendra Park Hotels' (NSE:PARKHOTELS) Returns On Capital Are Heading Higher

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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Speaking of which, we noticed some great changes in Apeejay Surrendra Park Hotels' (NSE:PARKHOTELS) 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 Apeejay Surrendra Park Hotels is:

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

0.10 = ₹1.4b ÷ (₹16b - ₹1.5b) (Based on the trailing twelve months to December 2024).

Thus, Apeejay Surrendra Park Hotels has an ROCE of 10%. On its own, that's a standard return, however it's much better than the 8.3% generated by the Hospitality industry.

View our latest analysis for Apeejay Surrendra Park Hotels

In the above chart we have measured Apeejay Surrendra Park Hotels' 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 Apeejay Surrendra Park Hotels .

The Trend Of ROCE

Investors would be pleased with what's happening at Apeejay Surrendra Park Hotels. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 10%. 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 33%. 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.

Our Take On Apeejay Surrendra Park Hotels' ROCE

All in all, it's terrific to see that Apeejay Surrendra Park Hotels is reaping the rewards from prior investments and is growing its capital base. And since the stock has fallen 13% over the last year, there might be an opportunity here. So researching this company further and determining whether or not these trends will continue seems justified.

Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation for PARKHOTELS that compares the share price and estimated value.

While Apeejay Surrendra Park Hotels 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.