Stock Analysis

Returns At Prataap Snacks (NSE:DIAMONDYD) Are On The Way Up

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NSEI:DIAMONDYD

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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. So on that note, Prataap Snacks (NSE:DIAMONDYD) looks quite promising in regards to its trends of return on capital.

What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Prataap Snacks, this is the formula:

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

0.09 = ₹746m ÷ (₹10b - ₹1.9b) (Based on the trailing twelve months to March 2024).

Thus, Prataap Snacks has an ROCE of 9.0%. Ultimately, that's a low return and it under-performs the Food industry average of 13%.

See our latest analysis for Prataap Snacks

NSEI:DIAMONDYD Return on Capital Employed June 12th 2024

Above you can see how the current ROCE for Prataap Snacks 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 Prataap Snacks for free.

So How Is Prataap Snacks' ROCE Trending?

Prataap Snacks is showing promise given that its ROCE is trending up and to the right. The figures show that over the last five years, ROCE has grown 39% whilst employing roughly the same amount of capital. 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.

What We Can Learn From Prataap Snacks' ROCE

In summary, we're delighted to see that Prataap Snacks has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 2.7% to shareholders. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

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 DIAMONDYD that compares the share price and estimated value.

While Prataap Snacks 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.