What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. However, after investigating Avanti Feeds (NSE:AVANTIFEED), we don't think it's current trends fit the mold of a multi-bagger.
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 Avanti Feeds:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.19 = ₹6.3b ÷ (₹37b - ₹4.5b) (Based on the trailing twelve months to June 2025).
So, Avanti Feeds has an ROCE of 19%. In absolute terms, that's a satisfactory return, but compared to the Food industry average of 13% it's much better.
View our latest analysis for Avanti Feeds
Above you can see how the current ROCE for Avanti Feeds compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Avanti Feeds for free.
So How Is Avanti Feeds' ROCE Trending?
In terms of Avanti Feeds' historical ROCE movements, the trend isn't fantastic. Over the last five years, returns on capital have decreased to 19% from 25% five years ago. On the other hand, the company has been employing more capital without a corresponding improvement in sales in the last year, which could suggest these investments are longer term plays. It may take some time before the company starts to see any change in earnings from these investments.
Our Take On Avanti Feeds' ROCE
To conclude, we've found that Avanti Feeds is reinvesting in the business, but returns have been falling. Since the stock has gained an impressive 54% over the last five years, investors must think there's better things to come. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.
Avanti Feeds does have some risks though, and we've spotted 1 warning sign for Avanti Feeds 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.