Shareholders Are Optimistic That Berger Paints India (NSE:BERGEPAINT) Will Multiply In Value

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. Ergo, when we looked at the ROCE trends at Berger Paints India (NSE:BERGEPAINT), we liked what we saw.

What Is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Berger Paints India:

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

0.23 = ₹15b ÷ (₹89b - ₹27b) (Based on the trailing twelve months to September 2024).

Therefore, Berger Paints India has an ROCE of 23%. That's a fantastic return and not only that, it outpaces the average of 13% earned by companies in a similar industry.

Check out our latest analysis for Berger Paints India

Above you can see how the current ROCE for Berger Paints India compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Berger Paints India .

How Are Returns Trending?

It's hard not to be impressed by Berger Paints India's returns on capital. The company has consistently earned 23% for the last five years, and the capital employed within the business has risen 98% in that time. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. If these trends can continue, it wouldn't surprise us if the company became a multi-bagger.

Our Take On Berger Paints India's ROCE

In summary, we're delighted to see that Berger Paints India has been compounding returns by reinvesting at consistently high rates of return, as these are common traits of a multi-bagger. Despite the good fundamentals, total returns from the stock have been virtually flat over the last five years. For that reason, savvy investors might want to look further into this company in case it's a prime investment.

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation for BERGEPAINT on our platform that is definitely worth checking out.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity.

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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.