The Trend Of High Returns At Balaji Amines (NSE:BALAMINES) Has Us Very Interested

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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 looked at the ROCE trend of Balaji Amines (NSE:BALAMINES) we really liked what we saw.

Understanding 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 Balaji Amines, this is the formula:

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

0.43 = ₹5.2b ÷ (₹16b - ₹3.7b) (Based on the trailing twelve months to December 2021).

Therefore, Balaji Amines has an ROCE of 43%. In absolute terms that's a great return and it's even better than the Chemicals industry average of 18%.

View our latest analysis for Balaji Amines

In the above chart we have measured Balaji Amines' prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Balaji Amines here for free.

How Are Returns Trending?

Investors would be pleased with what's happening at Balaji Amines. Over the last five years, returns on capital employed have risen substantially to 43%. Basically the business is earning more per dollar of capital invested and in addition to that, 197% more capital is being employed now too. So we're very much inspired by what we're seeing at Balaji Amines thanks to its ability to profitably reinvest capital.

One more thing to note, Balaji Amines has decreased current liabilities to 23% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. This tells us that Balaji Amines has grown its returns without a reliance on increasing their current liabilities, which we're very happy with.

The Bottom Line On Balaji Amines' ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Balaji Amines has. Since the stock has returned a staggering 717% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation that compares the share price and estimated value.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.