Globus Spirits (NSE:GLOBUSSPR) Is Doing The Right Things To Multiply Its Share Price

There are a few key trends to look for if we want to identify the next multi-bagger. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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 Globus Spirits' (NSE:GLOBUSSPR) returns on capital, so let's have a look.

Return On Capital Employed (ROCE): What Is It?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Globus Spirits:

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

0.19 = ₹2.1b ÷ (₹14b - ₹3.8b) (Based on the trailing twelve months to December 2022).

Thus, Globus Spirits has an ROCE of 19%. On its own, that's a standard return, however it's much better than the 15% generated by the Beverage industry.

See our latest analysis for Globus Spirits

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

SWOT Analysis for Globus Spirits

What Does the ROCE Trend For Globus Spirits Tell Us?

We like the trends that we're seeing from Globus Spirits. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 19%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 90%. So we're very much inspired by what we're seeing at Globus Spirits thanks to its ability to profitably reinvest capital.

Our Take On Globus Spirits' ROCE

All in all, it's terrific to see that Globus Spirits is reaping the rewards from prior investments and is growing its capital base. And a remarkable 506% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

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

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and 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.