Shree Pushkar Chemicals & Fertilisers' (NSE:SHREEPUSHK) Returns Have Hit A Wall

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, the ROCE of Shree Pushkar Chemicals & Fertilisers (NSE:SHREEPUSHK) looks decent, right now, so lets see what the trend of returns can tell us.

We've discovered 3 warning signs about Shree Pushkar Chemicals & Fertilisers. View them for free.

Return On Capital Employed (ROCE): What Is It?

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 Shree Pushkar Chemicals & Fertilisers, this is the formula:

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

0.10 = ₹558m ÷ (₹7.8b - ₹2.2b) (Based on the trailing twelve months to December 2024).

Thus, Shree Pushkar Chemicals & Fertilisers has an ROCE of 10%. In absolute terms, that's a pretty standard return but compared to the Chemicals industry average it falls behind.

Check out our latest analysis for Shree Pushkar Chemicals & Fertilisers

Historical performance is a great place to start when researching a stock so above you can see the gauge for Shree Pushkar Chemicals & Fertilisers' ROCE against it's prior returns. If you'd like to look at how Shree Pushkar Chemicals & Fertilisers has performed in the past in other metrics, you can view this free graph of Shree Pushkar Chemicals & Fertilisers' past earnings, revenue and cash flow.

The Trend Of ROCE

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 10% and the business has deployed 72% more capital into its operations. 10% is a pretty standard return, and it provides some comfort knowing that Shree Pushkar Chemicals & Fertilisers 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 Shree Pushkar Chemicals & Fertilisers' ROCE

The main thing to remember is that Shree Pushkar Chemicals & Fertilisers has proven its ability to continually reinvest at respectable rates of return. And the stock has done incredibly well with a 242% return over the last five years, so long term investors are no doubt ecstatic with that result. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

If you want to continue researching Shree Pushkar Chemicals & Fertilisers, you might be interested to know about the 3 warning signs that our analysis has discovered.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and 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.