Returns Are Gaining Momentum At Allcargo Terminals (NSE:ATL)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at Allcargo Terminals (NSE:ATL) and its trend of ROCE, we really 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 Allcargo Terminals is:

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

0.11 = ₹692m ÷ (₹8.0b - ₹1.6b) (Based on the trailing twelve months to September 2024).

So, Allcargo Terminals has an ROCE of 11%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Infrastructure industry average of 13%.

View our latest analysis for Allcargo Terminals

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

How Are Returns Trending?

The trends we've noticed at Allcargo Terminals are quite reassuring. Over the last three years, returns on capital employed have risen substantially to 11%. The amount of capital employed has increased too, by 814%. So we're very much inspired by what we're seeing at Allcargo Terminals thanks to its ability to profitably reinvest capital.

The Bottom Line On Allcargo Terminals' ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Allcargo Terminals has. Since the stock has returned a solid 8.5% to shareholders over the last year, it's fair to say investors are beginning to recognize these changes. In light of that, we think it's worth looking further into this stock because if Allcargo Terminals can keep these trends up, it could have a bright future ahead.

Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation for ATL that compares the share price and estimated value.

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.

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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.