Shivalik Bimetal Controls (NSE:SBCL) Is Investing Its Capital With Increasing Efficiency

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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. And in light of that, the trends we're seeing at Shivalik Bimetal Controls' (NSE:SBCL) look very promising so lets take a look.

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 Shivalik Bimetal Controls is:

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

0.33 = ₹984m ÷ (₹3.9b - ₹953m) (Based on the trailing twelve months to March 2023).

So, Shivalik Bimetal Controls has an ROCE of 33%. In absolute terms that's a great return and it's even better than the Metals and Mining industry average of 13%.

See our latest analysis for Shivalik Bimetal Controls

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

So How Is Shivalik Bimetal Controls' ROCE Trending?

Shivalik Bimetal Controls is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 33%. 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 207%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

In another part of our analysis, we noticed that the company's ratio of current liabilities to total assets decreased to 24%, which broadly means the business is relying less on its suppliers or short-term creditors to fund its operations. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance.

In Conclusion...

In summary, it's great to see that Shivalik Bimetal Controls can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And a remarkable 154% total return over the last year tells us that investors are expecting more good things to come in the future. 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.

On a final note, we've found 1 warning sign for Shivalik Bimetal Controls that we think you should be aware of.

High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.