If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So, when we ran our eye over G.M. Breweries' (NSE:GMBREW) trend of ROCE, we liked what we saw.
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. The formula for this calculation on G.M. Breweries is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.12 = ₹1.1b ÷ (₹11b - ₹1.6b) (Based on the trailing twelve months to June 2025).
Therefore, G.M. Breweries has an ROCE of 12%. That's a relatively normal return on capital, and it's around the 14% generated by the Beverage industry.
View our latest analysis for G.M. Breweries
Historical performance is a great place to start when researching a stock so above you can see the gauge for G.M. Breweries' ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of G.M. Breweries.
How Are Returns Trending?
While the returns on capital are good, they haven't moved much. The company has consistently earned 12% for the last five years, and the capital employed within the business has risen 116% in that time. 12% is a pretty standard return, and it provides some comfort knowing that G.M. Breweries has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.
The Key Takeaway
To sum it up, G.M. Breweries has simply been reinvesting capital steadily, at those decent rates of return. And long term investors would be thrilled with the 215% return they've received over the last five years. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.
Like most companies, G.M. Breweries does come with some risks, and we've found 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.