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Ambey Laboratories (NSE:AMBEY) Could Be Struggling To Allocate Capital

Simply Wall St · 5d ago

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Although, when we looked at Ambey Laboratories (NSE:AMBEY), it didn't seem to tick all of these boxes.

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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. The formula for this calculation on Ambey Laboratories is:

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

0.074 = ₹82m ÷ (₹1.4b - ₹291m) (Based on the trailing twelve months to September 2025).

So, Ambey Laboratories has an ROCE of 7.4%. In absolute terms, that's a low return and it also under-performs the Chemicals industry average of 12%.

See our latest analysis for Ambey Laboratories

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

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'd like to look at how Ambey Laboratories has performed in the past in other metrics, you can view this free graph of Ambey Laboratories' past earnings, revenue and cash flow.

So How Is Ambey Laboratories' ROCE Trending?

The trend of ROCE doesn't look fantastic because it's fallen from 29% five years ago, while the business's capital employed increased by 528%. 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 looking 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 Ambey Laboratories' earnings and if they change as a result from the capital raise.

On a side note, Ambey Laboratories has done well to pay down its current liabilities to 21% of total assets. That could partly explain why the ROCE has dropped. Effectively this means their suppliers or short-term creditors are funding less of the business, which reduces some elements of risk. Since the business is basically funding more of its operations with it's own money, you could argue this has made the business less efficient at generating ROCE.

In Conclusion...

To conclude, we've found that Ambey Laboratories is reinvesting in the business, but returns have been falling. And investors appear hesitant that the trends will pick up because the stock has fallen 41% in the last year. On the whole, we aren't too inspired by the underlying trends and we think there may be better chances of finding a multi-bagger elsewhere.

One final note, you should learn about the 5 warning signs we've spotted with Ambey Laboratories (including 4 which can't be ignored) .

While Ambey Laboratories may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.