Dodla Dairy (NSE:DODLA) Is Achieving High Returns On Its Capital

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, 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. So when we looked at the ROCE trend of Dodla Dairy (NSE:DODLA) we really liked what we saw.

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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 Dodla Dairy:

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

0.44 = ₹6.0b ÷ (₹17b - ₹2.9b) (Based on the trailing twelve months to December 2024).

Thus, Dodla Dairy has an ROCE of 44%. In absolute terms that's a great return and it's even better than the Food industry average of 13%.

Check out our latest analysis for Dodla Dairy

In the above chart we have measured Dodla Dairy's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Dodla Dairy .

What Does the ROCE Trend For Dodla Dairy Tell Us?

Investors would be pleased with what's happening at Dodla Dairy. The data shows that returns on capital have increased substantially over the last five years to 44%. Basically the business is earning more per dollar of capital invested and in addition to that, 142% more capital is being employed now too. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

Our Take On Dodla Dairy's ROCE

All in all, it's terrific to see that Dodla Dairy is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 135% to shareholders over the last three years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Dodla Dairy can keep these trends up, it could have a bright future ahead.

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation for DODLA on our platform that is definitely worth checking out.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high 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.