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Investors Shouldn't Overlook Balu Forge Industries' (NSE:BALUFORGE) Impressive Returns On Capital

Simply Wall St · 4d ago

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, the ROCE of Balu Forge Industries (NSE:BALUFORGE) looks great, so lets see what the trend can tell us.

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Return On Capital Employed (ROCE): What Is It?

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. Analysts use this formula to calculate it for Balu Forge Industries:

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

0.23 = ₹2.9b ÷ (₹15b - ₹2.5b) (Based on the trailing twelve months to September 2025).

Therefore, Balu Forge Industries has an ROCE of 23%. In absolute terms that's a great return and it's even better than the Machinery industry average of 15%.

See our latest analysis for Balu Forge Industries

roce
NSEI:BALUFORGE Return on Capital Employed January 8th 2026

Historical performance is a great place to start when researching a stock so above you can see the gauge for Balu Forge Industries' ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Balu Forge Industries.

What The Trend Of ROCE Can Tell Us

Balu Forge Industries has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses five years ago, but now it's earning 23% which is a sight for sore eyes. Not only that, but the company is utilizing 5,650% more capital than before, but that's to be expected from a company trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

For the record though, there was a noticeable increase in the company's current liabilities over the period, so we would attribute some of the ROCE growth to that. The current liabilities has increased to 16% of total assets, so the business is now more funded by the likes of its suppliers or short-term creditors. It's worth keeping an eye on this because as the percentage of current liabilities to total assets increases, some aspects of risk also increase.

The Bottom Line

Overall, Balu Forge Industries gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. And since the stock has fallen 31% over the last year, there might be an opportunity here. So researching this company further and determining whether or not these trends will continue seems justified.

One more thing to note, we've identified 1 warning sign with Balu Forge Industries and understanding it should be part of your investment process.

Balu Forge Industries 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.