Bannari Amman Sugars (NSE:BANARISUG) Is Looking To Continue Growing Its Returns On Capital

If you're looking for a multi-bagger, there's a few things to keep an eye out for. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Bannari Amman Sugars' (NSE:BANARISUG) returns on capital, so let's have a look.

What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Bannari Amman Sugars is:

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

0.16 = ₹3.0b ÷ (₹22b - ₹4.3b) (Based on the trailing twelve months to December 2023).

Therefore, Bannari Amman Sugars has an ROCE of 16%. That's a relatively normal return on capital, and it's around the 15% generated by the Food industry.

Check out our latest analysis for Bannari Amman Sugars

Historical performance is a great place to start when researching a stock so above you can see the gauge for Bannari Amman Sugars' ROCE against it's prior returns. If you're interested in investigating Bannari Amman Sugars' past further, check out this free graph covering Bannari Amman Sugars' past earnings, revenue and cash flow.

How Are Returns Trending?

Bannari Amman Sugars' ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 209% in that same time. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

The Bottom Line

To sum it up, Bannari Amman Sugars is collecting higher returns from the same amount of capital, and that's impressive. And with a respectable 55% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. 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.

If you'd like to know about the risks facing Bannari Amman Sugars, we've discovered 1 warning sign that you should be aware of.

While Bannari Amman Sugars isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.