Why The 46% Return On Capital At Alkyl Amines Chemicals (NSE:ALKYLAMINE) Should Have Your Attention

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. And in light of that, the trends we're seeing at Alkyl Amines Chemicals' (NSE:ALKYLAMINE) look very promising so lets take 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. To calculate this metric for Alkyl Amines Chemicals, this is the formula:

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

0.46 = ₹4.0b ÷ (₹11b - ₹2.8b) (Based on the trailing twelve months to March 2021).

Thus, Alkyl Amines Chemicals has an ROCE of 46%. That's a fantastic return and not only that, it outpaces the average of 15% earned by companies in a similar industry.

Check out our latest analysis for Alkyl Amines Chemicals

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

The Trend Of ROCE

Alkyl Amines Chemicals is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 46%. 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 203%. So we're very much inspired by what we're seeing at Alkyl Amines Chemicals thanks to its ability to profitably reinvest capital.

Our Take On Alkyl Amines Chemicals' ROCE

All in all, it's terrific to see that Alkyl Amines Chemicals is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 2,602% to shareholders over the last five years, it looks like investors are recognizing these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

If you want to continue researching Alkyl Amines Chemicals, you might be interested to know about the 2 warning signs that our analysis has discovered.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

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This article by Simply Wall St is general in nature. 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.
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