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- NSEI:DALBHARAT
There's Been No Shortage Of Growth Recently For Dalmia Bharat's (NSE:DALBHARAT) Returns On Capital
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. With that in mind, we've noticed some promising trends at Dalmia Bharat (NSE:DALBHARAT) so let's look a bit deeper.
Return On Capital Employed (ROCE): What is it?
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. The formula for this calculation on Dalmia Bharat is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.096 = ₹17b ÷ (₹230b - ₹48b) (Based on the trailing twelve months to September 2021).
Therefore, Dalmia Bharat has an ROCE of 9.6%. Ultimately, that's a low return and it under-performs the Basic Materials industry average of 13%.
Check out our latest analysis for Dalmia Bharat
Above you can see how the current ROCE for Dalmia Bharat compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Dalmia Bharat here for free.
So How Is Dalmia Bharat's ROCE Trending?
While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. The data shows that returns on capital have increased substantially over the last five years to 9.6%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 73%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.
In Conclusion...
All in all, it's terrific to see that Dalmia Bharat is reaping the rewards from prior investments and is growing its capital base. And with a respectable 78% awarded to those who held the stock over the last three years, you could argue that these developments are starting to get the attention they deserve. 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 want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.
About NSEI:DALBHARAT
Dalmia Bharat
Manufactures and sells clinker and cement products primarily in India.
Flawless balance sheet with moderate growth potential.
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