Anupam Rasayan India (NSE:ANURAS) Hasn't Managed To Accelerate Its Returns

There are a few key trends to look for if we want to identify the next multi-bagger. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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. However, after investigating Anupam Rasayan India (NSE:ANURAS), we don't think it's current trends fit the mold of a multi-bagger.

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 Anupam Rasayan India, this is the formula:

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

0.076 = ₹2.5b ÷ (₹46b - ₹13b) (Based on the trailing twelve months to June 2024).

Thus, Anupam Rasayan India has an ROCE of 7.6%. Ultimately, that's a low return and it under-performs the Chemicals industry average of 14%.

View our latest analysis for Anupam Rasayan India

Above you can see how the current ROCE for Anupam Rasayan India compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Anupam Rasayan India .

What Does the ROCE Trend For Anupam Rasayan India Tell Us?

There are better returns on capital out there than what we're seeing at Anupam Rasayan India. The company has employed 234% more capital in the last five years, and the returns on that capital have remained stable at 7.6%. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

The Bottom Line

In summary, Anupam Rasayan India has simply been reinvesting capital and generating the same low rate of return as before. Additionally, the stock's total return to shareholders over the last three years has been flat, which isn't too surprising. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

Like most companies, Anupam Rasayan India does come with some risks, and we've found 2 warning signs that you should be aware of.

While Anupam Rasayan India 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.