Aarti Surfactants (NSE:AARTISURF) Is Experiencing Growth In Returns On Capital

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So on that note, Aarti Surfactants (NSE:AARTISURF) looks quite promising in regards to its trends of return on capital.

We've discovered 4 warning signs about Aarti Surfactants. View them for free.

What Is Return On Capital Employed (ROCE)?

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. To calculate this metric for Aarti Surfactants, this is the formula:

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

0.096 = ₹281m ÷ (₹4.8b - ₹1.9b) (Based on the trailing twelve months to March 2025).

So, Aarti Surfactants has an ROCE of 9.6%. In absolute terms, that's a low return and it also under-performs the Chemicals industry average of 13%.

See our latest analysis for Aarti Surfactants

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Aarti Surfactants.

So How Is Aarti Surfactants' ROCE Trending?

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 9.6%. 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 74%. So we're very much inspired by what we're seeing at Aarti Surfactants thanks to its ability to profitably reinvest capital.

The Bottom Line

To sum it up, Aarti Surfactants has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Given the stock has declined 27% in the last three years, this could be a good investment if the valuation and other metrics are also appealing. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

On a final note, we found 4 warning signs for Aarti Surfactants (1 is significant) you should be aware of.

While Aarti Surfactants 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.