Shreyans Industries (NSE:SHREYANIND) Is Reinvesting To Multiply In Value

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Ergo, when we looked at the ROCE trends at Shreyans Industries (NSE:SHREYANIND), we liked what we saw.

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

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. Analysts use this formula to calculate it for Shreyans Industries:

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

0.22 = ₹676m ÷ (₹4.5b - ₹1.4b) (Based on the trailing twelve months to December 2022).

So, Shreyans Industries has an ROCE of 22%. That's a fantastic return and not only that, it outpaces the average of 16% earned by companies in a similar industry.

See our latest analysis for Shreyans Industries

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

What Does the ROCE Trend For Shreyans Industries Tell Us?

Shreyans Industries deserves to be commended in regards to it's returns. The company has employed 53% more capital in the last five years, and the returns on that capital have remained stable at 22%. Returns like this are the envy of most businesses and given it has repeatedly reinvested at these rates, that's even better. If Shreyans Industries can keep this up, we'd be very optimistic about its future.

The Bottom Line

In short, we'd argue Shreyans Industries has the makings of a multi-bagger since its been able to compound its capital at very profitable rates of return. However, over the last five years, the stock hasn't provided much growth to shareholders in the way of total returns. For that reason, savvy investors might want to look further into this company in case it's a prime investment.

If you want to know some of the risks facing Shreyans Industries we've found 3 warning signs (1 doesn't sit too well with us!) that you should be aware of before investing here.

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.