Stock Analysis

Investors Shouldn't Overlook Indo Borax & Chemicals' (NSE:INDOBORAX) Impressive Returns On Capital

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To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at the ROCE trend of Indo Borax & Chemicals (NSE:INDOBORAX) 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. The formula for this calculation on Indo Borax & Chemicals is:

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

0.26 = ₹599m ÷ (₹2.5b - ₹193m) (Based on the trailing twelve months to December 2022).

So, Indo Borax & Chemicals has an ROCE of 26%. In absolute terms that's a great return and it's even better than the Chemicals industry average of 17%.

Check out our latest analysis for Indo Borax & Chemicals

NSEI:INDOBORAX Return on Capital Employed March 29th 2023

Historical performance is a great place to start when researching a stock so above you can see the gauge for Indo Borax & Chemicals' ROCE against it's prior returns. If you're interested in investigating Indo Borax & Chemicals' past further, check out this free graph of past earnings, revenue and cash flow.

What Can We Tell From Indo Borax & Chemicals' ROCE Trend?

The trends we've noticed at Indo Borax & Chemicals are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 26%. The amount of capital employed has increased too, by 126%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Key Takeaway

All in all, it's terrific to see that Indo Borax & Chemicals is reaping the rewards from prior investments and is growing its capital base. Astute investors may have an opportunity here because the stock has declined 34% in the last year. With that in mind, we believe the promising trends warrant this stock for further investigation.

If you'd like to know about the risks facing Indo Borax & Chemicals, we've discovered 1 warning sign that you should be aware of.

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.

Valuation is complex, but we're helping make it simple.

Find out whether Indo Borax & Chemicals is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.