Coral India Finance and Housing’s (NSE:CORALFINAC) Returns Have Hit A Wall #IndiaFinance

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we’ll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So, when we ran our eye over Coral India Finance and Housing’s (NSE:CORALFINAC) trend of ROCE, we liked what we saw.

What Is Return On Capital Employed (ROCE)?

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. The formula for this calculation on Coral India Finance and Housing is:

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

0.11 = ₹259m ÷ (₹2.5b – ₹30m) (Based on the trailing twelve months to September 2024).

Thus, Coral India Finance and Housing has an ROCE of 11%. In isolation, that’s a pretty standard return but against the Construction industry average of 15%, it’s not as good.

View our latest analysis for Coral India Finance and Housing

Historical performance is a great place to start when researching a stock so above you can see the gauge for Coral India Finance and Housing’s ROCE against it’s prior returns. If you’re interested in investigating Coral India Finance and Housing’s past further, check out this free graph covering Coral India Finance and Housing’s past earnings, revenue and cash flow.

How Are Returns Trending?

The trend of ROCE doesn’t stand out much, but returns on a whole are decent. Over the past five years, ROCE has remained relatively flat at around 11% and the business has deployed 93% more capital into its operations. Since 11% is a moderate ROCE though, it’s good to see a business can continue to reinvest at these decent rates of return. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

The Key Takeaway

The main thing to remember is that Coral India Finance and Housing has proven its ability to continually reinvest at respectable rates of return. On top of that, the stock has rewarded shareholders with a remarkable 367% return to those who’ve held over the last five years. So even though the stock might be more “expensive” than it was before, we think the strong fundamentals warrant this stock for further research.

On a separate note, we’ve found 3 warning signs for Coral India Finance and Housing you’ll probably want to know about.

While Coral India Finance and Housing isn’t earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused 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.