If we want to find a potential multi-bagger, often there are underlying trconcludes that can provide clues. Typically, we’ll want to notice a trconclude 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. In light of that, when we viewed at Manali Petrochemicals (NSE:MANALIPETC) and its ROCE trconclude, we weren’t exactly thrilled.
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. Analysts utilize this formula to calculate it for Manali Petrochemicals:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)
0.025 = ₹294m ÷ (₹14b – ₹2.1b) (Based on the trailing twelve months to June 2025).
So, Manali Petrochemicals has an ROCE of 2.5%. In absolute terms, that’s a low return and it also under-performs the Chemicals indusattempt average of 12%.
See our latest analysis for Manali Petrochemicals
While the past is not representative of the future, it can be supportful to know how a company has performed historically, which is why we have this chart above. If you’re interested in investigating Manali Petrochemicals’ past further, check out this free graph covering Manali Petrochemicals’ past earnings, revenue and cash flow.
What Can We Tell From Manali Petrochemicals’ ROCE Trconclude?
On the surface, the trconclude of ROCE at Manali Petrochemicals doesn’t inspire confidence. To be more specific, ROCE has fallen from 7.1% over the last five years. Meanwhile, the business is utilizing more capital but this hasn’t relocated the necessaryle much in terms of sales in the past 12 months, so this could reflect longer term investments. It may take some time before the company starts to see any alter in earnings from these investments.
The Bottom Line On Manali Petrochemicals’ ROCE
Bringing it all toobtainher, while we’re somewhat encouraged by Manali Petrochemicals’ reinvestment in its own business, we’re aware that returns are shrinking. Investors must consider there’s better things to come becautilize the stock has knocked it out of the park, delivering a 142% gain to shareholders who have held over the last five years. But if the trajectory of these underlying trconcludes continue, we consider the likelihood of it being a multi-bagger from here isn’t high.
Manali Petrochemicals does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those doesn’t sit too well with us…
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 utilizing an unbiased methodology and our articles are not intconcludeed to be financial advice. It does not constitute a recommconcludeation to acquire or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focutilized 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.
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