Fertilisers and Chemicals Travancore (NSE:FACT) Will Want To Turn Around Its Return Trends

If you're looking for a multi-bagger, there's a few things to keep an eye out for. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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. However, after investigating Fertilisers and Chemicals Travancore (NSE:FACT), we don't think it's current trends fit the mold of a multi-bagger.

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What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Fertilisers and Chemicals Travancore, this is the formula:

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

0.088 = ₹1.4b ÷ (₹60b - ₹44b) (Based on the trailing twelve months to June 2025).

So, Fertilisers and Chemicals Travancore has an ROCE of 8.8%. In absolute terms, that's a low return and it also under-performs the Chemicals industry average of 12%.

See our latest analysis for Fertilisers and Chemicals Travancore

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Fertilisers and Chemicals Travancore has performed in the past in other metrics, you can view this free graph of Fertilisers and Chemicals Travancore's past earnings, revenue and cash flow.

What Can We Tell From Fertilisers and Chemicals Travancore's ROCE Trend?

On the surface, the trend of ROCE at Fertilisers and Chemicals Travancore doesn't inspire confidence. Over the last five years, returns on capital have decreased to 8.8% from 50% 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's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

Another thing to note, Fertilisers and Chemicals Travancore has a high ratio of current liabilities to total assets of 74%. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

The Bottom Line On Fertilisers and Chemicals Travancore's ROCE

In summary, Fertilisers and Chemicals Travancore is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. Yet to long term shareholders the stock has gifted them an incredible 1,578% return in the last five years, so the market appears to be rosy about its future. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.

One more thing, we've spotted 1 warning sign facing Fertilisers and Chemicals Travancore that you might find interesting.

While Fertilisers and Chemicals Travancore 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.