Time Technoplast's (NSE:TIMETECHNO) Returns Have Hit A Wall

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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 Time Technoplast (NSE:TIMETECHNO) looks decent, right now, so lets see what the trend of returns can tell us.

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 Time Technoplast is:

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

0.18 = ₹5.0b ÷ (₹39b - ₹11b) (Based on the trailing twelve months to December 2023).

Thus, Time Technoplast has an ROCE of 18%. In absolute terms, that's a satisfactory return, but compared to the Packaging industry average of 13% it's much better.

See our latest analysis for Time Technoplast

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

So How Is Time Technoplast's ROCE Trending?

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 18% and the business has deployed 42% more capital into its operations. Since 18% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. 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.

What We Can Learn From Time Technoplast's ROCE

In the end, Time Technoplast has proven its ability to adequately reinvest capital at good rates of return. And long term investors would be thrilled with the 240% return they've received over the last five years. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

One more thing to note, we've identified 2 warning signs with Time Technoplast and understanding these should be part of your investment process.

While Time Technoplast isn't earning the highest return, check out this free list of companies that are 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.