Returns On Capital Signal Tricky Times Ahead For Bigbloc Construction (NSE:BIGBLOC)

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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Although, when we looked at Bigbloc Construction (NSE:BIGBLOC), it didn't seem to tick all of these boxes.

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Return On Capital Employed (ROCE): What Is It?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Bigbloc Construction is:

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

0.019 = ₹53m ÷ (₹3.8b - ₹1.0b) (Based on the trailing twelve months to June 2025).

Therefore, Bigbloc Construction has an ROCE of 1.9%. Ultimately, that's a low return and it under-performs the Basic Materials industry average of 6.1%.

See our latest analysis for Bigbloc Construction

Historical performance is a great place to start when researching a stock so above you can see the gauge for Bigbloc Construction'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 Bigbloc Construction.

So How Is Bigbloc Construction's ROCE Trending?

In terms of Bigbloc Construction's historical ROCE movements, the trend isn't fantastic. To be more specific, ROCE has fallen from 4.3% over the last five years. 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 side note, Bigbloc Construction has done well to pay down its current liabilities to 27% of total assets. So we could link some of this to the decrease in ROCE. 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.

Our Take On Bigbloc Construction's ROCE

In summary, Bigbloc Construction is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. Investors must think there's better things to come because the stock has knocked it out of the park, delivering a 1,211% gain to shareholders who have held over the last five years. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.

Bigbloc Construction does have some risks, we noticed 5 warning signs (and 1 which shouldn't be ignored) we think you should know about.

While Bigbloc Construction 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.