The Returns At Pondy Oxides And Chemicals (NSE:POCL) Aren't Growing

There are a few key trends to look for if we want to identify the next multi-bagger. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of Pondy Oxides And Chemicals (NSE:POCL) looks decent, right now, so lets see what the trend of returns can tell us.

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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. The formula for this calculation on Pondy Oxides And Chemicals is:

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

0.15 = ₹905m ÷ (₹7.4b - ₹1.4b) (Based on the trailing twelve months to March 2025).

So, Pondy Oxides And Chemicals has an ROCE of 15%. That's a relatively normal return on capital, and it's around the 14% generated by the Metals and Mining industry.

See our latest analysis for Pondy Oxides And Chemicals

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Pondy Oxides And Chemicals has performed in the past in other metrics, you can view this free graph of Pondy Oxides And Chemicals' past earnings, revenue and cash flow.

What Can We Tell From Pondy Oxides And Chemicals' ROCE Trend?

While the current returns on capital are decent, they haven't changed much. Over the past five years, ROCE has remained relatively flat at around 15% and the business has deployed 278% more capital into its operations. 15% is a pretty standard return, and it provides some comfort knowing that Pondy Oxides And Chemicals has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

The Bottom Line On Pondy Oxides And Chemicals' ROCE

The main thing to remember is that Pondy Oxides And Chemicals has proven its ability to continually reinvest at respectable rates of return. And long term investors would be thrilled with the 137% return they've received over the last year. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

On a final note, we found 3 warning signs for Pondy Oxides And Chemicals (2 shouldn't be ignored) you should be aware of.

While Pondy Oxides And Chemicals may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list 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.