Returns At Panama Petrochem (NSE:PANAMAPET) Are On The Way Up

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, 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 Panama Petrochem (NSE:PANAMAPET) and its trend of ROCE, we really liked what we saw.

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Return On Capital Employed (ROCE): What Is It?

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 Panama Petrochem is:

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

0.18 = ₹2.5b ÷ (₹16b - ₹2.5b) (Based on the trailing twelve months to September 2025).

Thus, Panama Petrochem has an ROCE of 18%. On its own, that's a standard return, however it's much better than the 12% generated by the Chemicals industry.

View our latest analysis for Panama Petrochem

Historical performance is a great place to start when researching a stock so above you can see the gauge for Panama Petrochem's ROCE against it's prior returns. If you'd like to look at how Panama Petrochem has performed in the past in other metrics, you can view this free graph of Panama Petrochem's past earnings, revenue and cash flow.

What Does the ROCE Trend For Panama Petrochem Tell Us?

The trends we've noticed at Panama Petrochem are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 18%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 204%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

One more thing to note, Panama Petrochem has decreased current liabilities to 15% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. This tells us that Panama Petrochem has grown its returns without a reliance on increasing their current liabilities, which we're very happy with.

Our Take On Panama Petrochem's ROCE

All in all, it's terrific to see that Panama Petrochem is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 413% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Panama Petrochem can keep these trends up, it could have a bright future ahead.

One more thing to note, we've identified 1 warning sign with Panama Petrochem and understanding this should be part of your investment process.

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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.