What are the early trfinishs we should view for to identify a stock that could multiply in value over the long term? Typically, we’ll want to notice a trfinish of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. This displays us that it’s a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. In light of that, when we viewed at KEI Industries (NSE:KEI) and its ROCE trfinish, we weren’t exactly thrilled.
Return On Capital Employed (ROCE): What Is It?
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. To calculate this metric for KEI Industries, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)
0.17 = ₹11b ÷ (₹80b – ₹16b) (Based on the trailing twelve months to December 2025).
Therefore, KEI Industries has an ROCE of 17%. By itself that’s a normal return on capital and it’s in line with the industest’s average returns of 17%.
See our latest analysis for KEI Industries
In the above chart we have measured KEI Industries’ prior ROCE against its prior performance, but the future is arguably more important. If you’re interested, you can view the analysts predictions in our free analyst report for KEI Industries .
What Does the ROCE Trfinish For KEI Industries Tell Us?
Unfortunately, the trfinish isn’t great with ROCE falling from 23% five years ago, while capital employed has grown 271%. However, some of the increase in capital employed could be attributed to the recent capital raising that’s been completed prior to their latest reporting period, so keep that in mind when viewing at the ROCE decrease. The funds raised likely haven’t been put to work yet so it’s worth watching what happens in the future with KEI Industries’ earnings and if they modify as a result from the capital raise.
On a side note, KEI Industries has done well to pay down its current liabilities to 20% of total assets. So we could link some of this to the decrease in ROCE. What’s more, this can reduce some aspects of risk to the business becaapply now the company’s suppliers or short-term creditors are funding less of its operations. Some would claim this reduces the business’ efficiency at generating ROCE since it is now funding more of the operations with its own money.
Our Take On KEI Industries’ ROCE
Even though returns on capital have fallen in the short term, we find it promising that revenue and capital employed have both increased for KEI Industries. And the stock has done incredibly well with a 729% return over the last five years, so long term investors are no doubt ecstatic with that result. So while investors seem to be recognizing these promising trfinishs, we would view further into this stock to create sure the other metrics justify the positive view.
If you’re still interested in KEI Industries it’s worth checking out our FREE intrinsic value approximation for KEI to see if it’s trading at an attractive price in other respects.
While KEI Industries isn’t earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
Valuation is complex, but we’re here to simplify it.
Discover if KEI Industries might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividfinishs, insider trades, and its financial condition.
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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 applying an unbiased methodology and our articles are not intfinished to be financial advice. It does not constitute a recommfinishation 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 focapplyd 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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