Shree Tirupati Balajee FIBC (NSE:TIRUPATI) Is Reinvesting To Multiply In Value

There are a few key trends to look for if we want to identify the next multi-bagger. 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. 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 Shree Tirupati Balajee FIBC (NSE:TIRUPATI), we 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 Shree Tirupati Balajee FIBC is:

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

0.26 = ₹235m ÷ (₹1.4b - ₹457m) (Based on the trailing twelve months to September 2023).

So, Shree Tirupati Balajee FIBC has an ROCE of 26%. In absolute terms that's a great return and it's even better than the Packaging industry average of 11%.

See our latest analysis for Shree Tirupati Balajee FIBC

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Shree Tirupati Balajee FIBC has performed in the past in other metrics, you can view this free graph of Shree Tirupati Balajee FIBC's past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

In terms of Shree Tirupati Balajee FIBC's history of ROCE, it's quite impressive. Over the past five years, ROCE has remained relatively flat at around 26% and the business has deployed 124% more capital into its operations. Now considering ROCE is an attractive 26%, this combination is actually pretty appealing because it means the business can consistently put money to work and generate these high returns. If Shree Tirupati Balajee FIBC can keep this up, we'd be very optimistic about its future.

The Bottom Line On Shree Tirupati Balajee FIBC's ROCE

In the end, the company has proven it can reinvest it's capital at high rates of returns, which you'll remember is a trait of a multi-bagger. And the stock has done incredibly well with a 1,386% 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.

Shree Tirupati Balajee FIBC does have some risks, we noticed 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com