Returns At Dollex Agrotech (NSE:DOLLEX) Are On The Way Up

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Dollex Agrotech (NSE:DOLLEX) 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. The formula for this calculation on Dollex Agrotech is:

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

0.073 = ₹128m ÷ (₹2.3b - ₹603m) (Based on the trailing twelve months to September 2024).

Thus, Dollex Agrotech has an ROCE of 7.3%. In absolute terms, that's a low return and it also under-performs the Food industry average of 13%.

Check out our latest analysis for Dollex Agrotech

Historical performance is a great place to start when researching a stock so above you can see the gauge for Dollex Agrotech's ROCE against it's prior returns. If you'd like to look at how Dollex Agrotech has performed in the past in other metrics, you can view this free graph of Dollex Agrotech's past earnings, revenue and cash flow.

The Trend Of ROCE

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. Over the last four years, returns on capital employed have risen substantially to 7.3%. Basically the business is earning more per dollar of capital invested and in addition to that, 156% 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.

The Bottom Line On Dollex Agrotech's ROCE

To sum it up, Dollex Agrotech has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And since the stock has fallen 11% over the last year, there might be an opportunity here. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

On a final note, we've found 3 warning signs for Dollex Agrotech that we think you should be aware of.

While Dollex Agrotech may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.