Why You Should Care About N Gadgil Jewellers' (NSE:PNGJL) Strong Returns On Capital

What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of N Gadgil Jewellers (NSE:PNGJL) looks attractive right now, so lets see what the trend of returns can tell us.

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Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on N Gadgil Jewellers is:

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

0.21 = ₹3.4b ÷ (₹31b - ₹15b) (Based on the trailing twelve months to June 2025).

So, N Gadgil Jewellers has an ROCE of 21%. In absolute terms that's a great return and it's even better than the Specialty Retail industry average of 15%.

See our latest analysis for N Gadgil Jewellers

Above you can see how the current ROCE for N Gadgil Jewellers compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for N Gadgil Jewellers .

How Are Returns Trending?

We'd be pretty happy with returns on capital like N Gadgil Jewellers. The company has consistently earned 21% for the last four years, and the capital employed within the business has risen 463% in that time. Returns like this are the envy of most businesses and given it has repeatedly reinvested at these rates, that's even better. You'll see this when looking at well operated businesses or favorable business models.

One more thing to note, even though ROCE has remained relatively flat over the last four years, the reduction in current liabilities to 47% of total assets, is good to see from a business owner's perspective. Effectively suppliers now fund less of the business, which can lower some elements of risk. We'd like to see this trend continue though because as it stands today, thats still a pretty high level.

In Conclusion...

In short, we'd argue N Gadgil Jewellers has the makings of a multi-bagger since its been able to compound its capital at very profitable rates of return. Yet over the last year the stock has declined 13%, so the decline might provide an opening. For that reason, savvy investors might want to look further into this company in case it's a prime investment.

N Gadgil Jewellers does have some risks though, and we've spotted 1 warning sign for N Gadgil Jewellers that you might be interested in.

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.