Return Trends At Graphisads (NSE:GRAPHISAD) Aren't Appealing

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. However, after investigating Graphisads (NSE:GRAPHISAD), we don't think it's current trends fit the mold of a multi-bagger.

What Is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Graphisads is:

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

0.086 = ₹99m ÷ (₹1.8b - ₹613m) (Based on the trailing twelve months to September 2024).

Thus, Graphisads has an ROCE of 8.6%. On its own that's a low return on capital but it's in line with the industry's average returns of 8.5%.

View our latest analysis for Graphisads

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

The Trend Of ROCE

There are better returns on capital out there than what we're seeing at Graphisads. Over the past three years, ROCE has remained relatively flat at around 8.6% and the business has deployed 113% more capital into its operations. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

The Key Takeaway

As we've seen above, Graphisads' returns on capital haven't increased but it is reinvesting in the business. And investors appear hesitant that the trends will pick up because the stock has fallen 23% in the last year. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.

On a final note, we've found 1 warning sign for Graphisads that we think you should be aware of.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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

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.