Under The Bonnet, Pidilite Industries' (NSE:PIDILITIND) Returns Look Impressive

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of Pidilite Industries (NSE:PIDILITIND) looks great, so lets see what the trend can tell us.

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Understanding 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. The formula for this calculation on Pidilite Industries is:

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

0.26 = ₹28b ÷ (₹140b - ₹33b) (Based on the trailing twelve months to June 2025).

So, Pidilite Industries has an ROCE of 26%. In absolute terms that's a great return and it's even better than the Chemicals industry average of 12%.

See our latest analysis for Pidilite Industries

In the above chart we have measured Pidilite Industries' 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 analyst report for Pidilite Industries .

So How Is Pidilite Industries' ROCE Trending?

Pidilite Industries is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 26%. 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 118%. 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.

Our Take On Pidilite Industries' ROCE

To sum it up, Pidilite Industries has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a staggering 110% to shareholders over the last five years, it looks like investors are recognizing these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

If you'd like to know about the risks facing Pidilite Industries, we've discovered 1 warning sign that 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. 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.