Stock Analysis

Navin Fluorine International (NSE:NAVINFLUOR) Has Some Way To Go To Become A Multi-Bagger

NSEI:NAVINFLUOR
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If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So, when we ran our eye over Navin Fluorine International's (NSE:NAVINFLUOR) trend of ROCE, we liked what we saw.

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. Analysts use this formula to calculate it for Navin Fluorine International:

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

0.15 = ₹5.1b ÷ (₹40b - ₹6.5b) (Based on the trailing twelve months to September 2023).

So, Navin Fluorine International has an ROCE of 15%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Chemicals industry average of 14%.

View our latest analysis for Navin Fluorine International

roce
NSEI:NAVINFLUOR Return on Capital Employed November 25th 2023

In the above chart we have measured Navin Fluorine International's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Navin Fluorine International.

What Can We Tell From Navin Fluorine International's ROCE Trend?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. Over the past five years, ROCE has remained relatively flat at around 15% and the business has deployed 210% more capital into its operations. Since 15% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

Our Take On Navin Fluorine International's ROCE

To sum it up, Navin Fluorine International has simply been reinvesting capital steadily, at those decent rates of return. And the stock has done incredibly well with a 443% return over the last five years, so long term investors are no doubt ecstatic with that result. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

Navin Fluorine International does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable...

While Navin Fluorine International isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

Valuation is complex, but we're here to simplify it.

Discover if Navin Fluorine International might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.

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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.