There Are Reasons To Feel Uneasy About Shree Tirupati Balajee Agro Trading's (NSE:BALAJEE) Returns On Capital

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, 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. Having said that, from a first glance at Shree Tirupati Balajee Agro Trading (NSE:BALAJEE) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Shree Tirupati Balajee Agro Trading:

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

0.13 = ₹444m ÷ (₹5.9b - ₹2.4b) (Based on the trailing twelve months to June 2025).

Thus, Shree Tirupati Balajee Agro Trading has an ROCE of 13%. That's a relatively normal return on capital, and it's around the 12% generated by the Packaging industry.

Check out our latest analysis for Shree Tirupati Balajee Agro Trading

Historical performance is a great place to start when researching a stock so above you can see the gauge for Shree Tirupati Balajee Agro Trading's 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 Shree Tirupati Balajee Agro Trading.

How Are Returns Trending?

In terms of Shree Tirupati Balajee Agro Trading's historical ROCE movements, the trend isn't fantastic. Over the last five years, returns on capital have decreased to 13% from 22% five years ago. Meanwhile, the business is utilizing more capital but this hasn't moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It may take some time before the company starts to see any change in earnings from these investments.

On a related note, Shree Tirupati Balajee Agro Trading has decreased its current liabilities to 40% of total assets. That could partly explain why the ROCE has dropped. What's more, this can reduce some aspects of risk to the business because now the company's suppliers or short-term creditors are funding less of its operations. Some would claim this reduces the business' efficiency at generating ROCE since it is now funding more of the operations with its own money. Keep in mind 40% is still pretty high, so those risks are still somewhat prevalent.

The Bottom Line On Shree Tirupati Balajee Agro Trading's ROCE

Bringing it all together, while we're somewhat encouraged by Shree Tirupati Balajee Agro Trading's reinvestment in its own business, we're aware that returns are shrinking. Since the stock has declined 44% over the last year, investors may not be too optimistic on this trend improving either. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.

One more thing: We've identified 2 warning signs with Shree Tirupati Balajee Agro Trading (at least 1 which makes us a bit uncomfortable) , and understanding them would certainly be useful.

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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.