Here's What's Concerning About N R Agarwal Industries' (NSE:NRAIL) Returns On Capital

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. However, after investigating N R Agarwal Industries (NSE:NRAIL), 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)?

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 N R Agarwal Industries is:

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

0.024 = ₹334m ÷ (₹18b - ₹3.8b) (Based on the trailing twelve months to June 2025).

Therefore, N R Agarwal Industries has an ROCE of 2.4%. In absolute terms, that's a low return and it also under-performs the Packaging industry average of 11%.

View our latest analysis for N R Agarwal Industries

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

What Does the ROCE Trend For N R Agarwal Industries Tell Us?

When we looked at the ROCE trend at N R Agarwal Industries, we didn't gain much confidence. Around five years ago the returns on capital were 26%, but since then they've fallen to 2.4%. Although, given both revenue and the amount of assets employed in the business have increased, it could suggest the company is investing in growth, and the extra capital has led to a short-term reduction in ROCE. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.

The Bottom Line On N R Agarwal Industries' ROCE

Even though returns on capital have fallen in the short term, we find it promising that revenue and capital employed have both increased for N R Agarwal Industries. And long term investors must be optimistic going forward because the stock has returned a huge 162% to shareholders in the last five years. So while investors seem to be recognizing these promising trends, we would look further into this stock to make sure the other metrics justify the positive view.

On a final note, we found 6 warning signs for N R Agarwal Industries (3 are a bit concerning) you should be aware of.

While N R Agarwal Industries isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.