Blue Dart Express (NSE:BLUEDART) Could Become A Multi-Bagger

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. And in light of that, the trends we're seeing at Blue Dart Express' (NSE:BLUEDART) look very promising so lets take a look.

Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on Blue Dart Express is:

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

0.38 = ₹6.5b ÷ (₹31b - ₹14b) (Based on the trailing twelve months to December 2022).

Therefore, Blue Dart Express has an ROCE of 38%. In absolute terms that's a great return and it's even better than the Logistics industry average of 14%.

View our latest analysis for Blue Dart Express

Above you can see how the current ROCE for Blue Dart Express compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Blue Dart Express.

What Can We Tell From Blue Dart Express' ROCE Trend?

We like the trends that we're seeing from Blue Dart Express. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 38%. The amount of capital employed has increased too, by 108%. So we're very much inspired by what we're seeing at Blue Dart Express thanks to its ability to profitably reinvest capital.

On a separate but related note, it's important to know that Blue Dart Express has a current liabilities to total assets ratio of 44%, which we'd consider pretty high. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

The Key Takeaway

To sum it up, Blue Dart Express has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 45% return over the last five years. In light of that, we think it's worth looking further into this stock because if Blue Dart Express can keep these trends up, it could have a bright future ahead.

On a final note, we've found 2 warning signs for Blue Dart Express that we think you should be aware of.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high 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.