The Trend Of High Returns At Shivalik Bimetal Controls (NSE:SBCL) Has Us Very Interested

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at the ROCE trend of Shivalik Bimetal Controls (NSE:SBCL) we really liked what we saw.

What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Shivalik Bimetal Controls, this is the formula:

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

0.36 = ₹756m ÷ (₹3.1b - ₹954m) (Based on the trailing twelve months to June 2022).

So, Shivalik Bimetal Controls has an ROCE of 36%. That's a fantastic return and not only that, it outpaces the average of 17% earned by companies in a similar industry.

Check out 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.

What The Trend Of ROCE Can Tell Us

Investors would be pleased with what's happening at Shivalik Bimetal Controls. Over the last five years, returns on capital employed have risen substantially to 36%. The amount of capital employed has increased too, by 171%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

Our Take On Shivalik Bimetal Controls' ROCE

To sum it up, Shivalik Bimetal Controls has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with the stock having performed exceptionally well over the last year, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if Shivalik Bimetal Controls can keep these trends up, it could have a bright future ahead.

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

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity.

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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.