We Think Krishana Phoschem (NSE:KRISHANA) Might Have The DNA Of A Multi-Bagger

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. With that in mind, the ROCE of Krishana Phoschem (NSE:KRISHANA) looks great, so lets see what the trend can tell us.

What is 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. Analysts use this formula to calculate it for Krishana Phoschem:

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

0.21 = ₹338m ÷ (₹2.0b - ₹344m) (Based on the trailing twelve months to June 2021).

So, Krishana Phoschem has an ROCE of 21%. In absolute terms that's a great return and it's even better than the Chemicals industry average of 15%.

View our latest analysis for Krishana Phoschem

Historical performance is a great place to start when researching a stock so above you can see the gauge for Krishana Phoschem's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Krishana Phoschem, check out these free graphs here.

What The Trend Of ROCE Can Tell Us

We like the trends that we're seeing from Krishana Phoschem. The data shows that returns on capital have increased substantially over the last five years to 21%. The amount of capital employed has increased too, by 73%. So we're very much inspired by what we're seeing at Krishana Phoschem thanks to its ability to profitably reinvest capital.

What We Can Learn From Krishana Phoschem's ROCE

All in all, it's terrific to see that Krishana Phoschem is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 249% to shareholders over the last three years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

On a final note, we've found 4 warning signs for Krishana Phoschem that we think 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.

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This article by Simply Wall St is general in nature. 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.
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