Rama Phosphates (NSE:RAMAPHO) Has More To Do To Multiply In Value Going Forward

To find a multi-bagger stock, what are the underlying trends we should look for in a business? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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 Rama Phosphates (NSE:RAMAPHO) looks decent, right now, so lets see what the trend of returns 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. To calculate this metric for Rama Phosphates, this is the formula:

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

0.15 = ₹562m ÷ (₹6.3b - ₹2.5b) (Based on the trailing twelve months to June 2025).

Therefore, Rama Phosphates has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 12% generated by the Chemicals industry.

Check out our latest analysis for Rama Phosphates

Historical performance is a great place to start when researching a stock so above you can see the gauge for Rama Phosphates' ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Rama Phosphates.

How Are Returns Trending?

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 128% more capital into its operations. 15% is a pretty standard return, and it provides some comfort knowing that Rama Phosphates has consistently earned this amount. 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 Rama Phosphates' ROCE

In the end, Rama Phosphates has proven its ability to adequately reinvest capital at good rates of return. In light of this, the stock has only gained 17% over the last three years for shareholders who have owned the stock in this period. That's why it could be worth your time looking into this stock further to discover if it has more traits of a multi-bagger.

One final note, you should learn about the 2 warning signs we've spotted with Rama Phosphates (including 1 which is a bit unpleasant) .

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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.