WEBULL

Capital Allocation Trends At Ahlada Engineers (NSE:AHLADA) Aren't Ideal

Simply Wall St · 3d ago

When it comes to investing, there are some useful financial metrics that can warn us when a business is potentially in trouble. Businesses in decline often have two underlying trends, firstly, a declining return on capital employed (ROCE) and a declining base of capital employed. Trends like this ultimately mean the business is reducing its investments and also earning less on what it has invested. And from a first read, things don't look too good at Ahlada Engineers (NSE:AHLADA), so let's see why.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

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 Ahlada Engineers:

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

0.049 = ₹72m ÷ (₹2.2b - ₹702m) (Based on the trailing twelve months to September 2025).

Thus, Ahlada Engineers has an ROCE of 4.9%. Ultimately, that's a low return and it under-performs the Building industry average of 16%.

See our latest analysis for Ahlada Engineers

roce
NSEI:AHLADA 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 Ahlada Engineers has performed in the past in other metrics, you can view this free graph of Ahlada Engineers' past earnings, revenue and cash flow.

What Can We Tell From Ahlada Engineers' ROCE Trend?

We are a bit worried about the trend of returns on capital at Ahlada Engineers. About five years ago, returns on capital were 10%, however they're now substantially lower than that as we saw above. On top of that, it's worth noting that the amount of capital employed within the business has remained relatively steady. Since returns are falling and the business has the same amount of assets employed, this can suggest it's a mature business that hasn't had much growth in the last five years. If these trends continue, we wouldn't expect Ahlada Engineers to turn into a multi-bagger.

On a side note, Ahlada Engineers' current liabilities have increased over the last five years to 32% of total assets, effectively distorting the ROCE to some degree. Without this increase, it's likely that ROCE would be even lower than 4.9%. While the ratio isn't currently too high, it's worth keeping an eye on this because if it gets particularly high, the business could then face some new elements of risk.

The Key Takeaway

In the end, the trend of lower returns on the same amount of capital isn't typically an indication that we're looking at a growth stock. It should come as no surprise then that the stock has fallen 12% over the last five years, so it looks like investors are recognizing these changes. With underlying trends that aren't great in these areas, we'd consider looking elsewhere.

On a final note, we found 3 warning signs for Ahlada Engineers (2 are significant) you should be aware of.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.