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

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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.

Understanding 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 Shivalik Bimetal Controls is:

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

0.32 = ₹839m ÷ (₹3.7b - ₹1.1b) (Based on the trailing twelve months to September 2022).

Therefore, Shivalik Bimetal Controls has an ROCE of 32%. In absolute terms that's a great return and it's even better than the Metals and Mining industry average of 15%.

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'd like to look at how Shivalik Bimetal Controls has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

So How Is Shivalik Bimetal Controls' ROCE Trending?

The trends we've noticed at Shivalik Bimetal Controls are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 32%. Basically the business is earning more per dollar of capital invested and in addition to that, 201% more capital is being employed now too. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

In Conclusion...

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Shivalik Bimetal Controls has. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 62% return over the last year. Therefore, we think it would be worth your time to check if these trends are going to continue.

On a separate note, we've found 1 warning sign for Shivalik Bimetal Controls you'll probably want to know about.

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.