We Like Aurangabad Distillery's (NSE:AURDIS) Returns And Here's How They're Trending

Simply Wall St · 10/18 02:11

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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 Aurangabad Distillery's (NSE:AURDIS) look very promising so lets take a look.

What Is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for Aurangabad Distillery, this is the formula:

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

0.24 = ₹293m ÷ (₹1.8b - ₹625m) (Based on the trailing twelve months to March 2024).

So, Aurangabad Distillery has an ROCE of 24%. That's a fantastic return and not only that, it outpaces the average of 15% earned by companies in a similar industry.

See our latest analysis for Aurangabad Distillery

roce
NSEI:AURDIS Return on Capital Employed October 18th 2024

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating Aurangabad Distillery's past further, check out this free graph covering Aurangabad Distillery's past earnings, revenue and cash flow.

What Can We Tell From Aurangabad Distillery's ROCE Trend?

Investors would be pleased with what's happening at Aurangabad Distillery. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 24%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 130%. So we're very much inspired by what we're seeing at Aurangabad Distillery thanks to its ability to profitably reinvest capital.

Our Take On Aurangabad Distillery's ROCE

In summary, it's great to see that Aurangabad Distillery can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you'd like to know more about Aurangabad Distillery, we've spotted 4 warning signs, and 3 of them can't be ignored.

Aurangabad Distillery is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.