Sinclairs Hotels' (NSE:SINCLAIR) Returns Have Hit A Wall

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. In light of that, when we looked at Sinclairs Hotels (NSE:SINCLAIR) and its ROCE trend, we weren't exactly thrilled.

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Return On Capital Employed (ROCE): What Is It?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Sinclairs Hotels is:

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

0.094 = ₹133m ÷ (₹1.5b - ₹68m) (Based on the trailing twelve months to March 2025).

Therefore, Sinclairs Hotels has an ROCE of 9.4%. In absolute terms, that's a low return, but it's much better than the Hospitality industry average of 7.1%.

See our latest analysis for Sinclairs Hotels

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Sinclairs Hotels.

What Does the ROCE Trend For Sinclairs Hotels Tell Us?

In terms of Sinclairs Hotels' historical ROCE trend, it doesn't exactly demand attention. The company has employed 24% more capital in the last five years, and the returns on that capital have remained stable at 9.4%. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

The Bottom Line

As we've seen above, Sinclairs Hotels' returns on capital haven't increased but it is reinvesting in the business. And investors appear hesitant that the trends will pick up because the stock has fallen 11% in the last year. Therefore based on the analysis done in this article, we don't think Sinclairs Hotels has the makings of a multi-bagger.

On a separate note, we've found 2 warning signs for Sinclairs Hotels you'll probably want to know about.

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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.