We Like Kingfa Science & Technology (India)'s (NSE:KINGFA) Returns And Here's How They're Trending

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. And in light of that, the trends we're seeing at Kingfa Science & Technology (India)'s (NSE:KINGFA) look very promising so lets take a look.

Understanding 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. The formula for this calculation on Kingfa Science & Technology (India) is:

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

0.28 = ₹1.8b ÷ (₹11b - ₹4.1b) (Based on the trailing twelve months to September 2024).

Therefore, Kingfa Science & Technology (India) has an ROCE of 28%. In absolute terms that's a great return and it's even better than the Chemicals industry average of 13%.

View our latest analysis for Kingfa Science & Technology (India)

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're interested in investigating Kingfa Science & Technology (India)'s past further, check out this free graph covering Kingfa Science & Technology (India)'s past earnings, revenue and cash flow.

So How Is Kingfa Science & Technology (India)'s ROCE Trending?

Kingfa Science & Technology (India) is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 28%. The amount of capital employed has increased too, by 81%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

In Conclusion...

In summary, it's great to see that Kingfa Science & Technology (India) can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And a remarkable 473% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Kingfa Science & Technology (India) can keep these trends up, it could have a bright future ahead.

If you want to know some of the risks facing Kingfa Science & Technology (India) we've found 2 warning signs (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

Kingfa Science & Technology (India) is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.