Ritco Logistics (NSE:RITCO) Has More To Do To Multiply In Value Going Forward

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. That's why when we briefly looked at Ritco Logistics' (NSE:RITCO) ROCE trend, we were pretty happy with what we saw.

What Is 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. Analysts use this formula to calculate it for Ritco Logistics:

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

0.18 = ₹697m ÷ (₹5.5b - ₹1.7b) (Based on the trailing twelve months to December 2024).

So, Ritco Logistics has an ROCE of 18%. On its own, that's a standard return, however it's much better than the 15% generated by the Transportation industry.

See our latest analysis for Ritco Logistics

Historical performance is a great place to start when researching a stock so above you can see the gauge for Ritco Logistics' ROCE against it's prior returns. If you're interested in investigating Ritco Logistics' past further, check out this free graph covering Ritco Logistics' past earnings, revenue and cash flow.

The Trend Of ROCE

While the current returns on capital are decent, they haven't changed much. The company has consistently earned 18% for the last five years, and the capital employed within the business has risen 162% in that time. Since 18% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

Our Take On Ritco Logistics' ROCE

To sum it up, Ritco Logistics has simply been reinvesting capital steadily, at those decent rates of return. And the stock has followed suit returning a meaningful 25% to shareholders over the last year. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

If you'd like to know more about Ritco Logistics, we've spotted 3 warning signs, and 1 of them is concerning.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and 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.