Should You Like Bhansali Engineering Polymers Limited’s (NSE:BEPL) High Return On Capital Employed?

Should You Like Bhansali Engineering Polymers Limited’s (NSE:BEPL) High Return On Capital Employed?

has suggested that a high ROCE can indicate that ‘one dollar invested in the company generates value of more than one dollar’.’ data-reactid=”21″>ROCE measures the amount of pre-tax profits a company can generate from the capital employed in its business. Generally speaking a higher ROCE is better. Ultimately, it is a useful but imperfect metric. Renowned investment researcher Michael Mauboussin has suggested that a high ROCE can indicate that ‘one dollar invested in the company generates value of more than one dollar’.

How Do You Calculate Return On Capital Employed?

Analysts use this formula to calculate return on capital employed:

Or for Bhansali Engineering Polymers:

0.57 = ₹1.6b ÷ (₹4.2b – ₹1.5b) (Based on the trailing twelve months to March 2018.)

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Is Bhansali Engineering Polymers’s ROCE Good?

ROCE can be useful when making comparisons, such as between similar companies. Bhansali Engineering Polymers’s ROCE appears to be substantially greater than the 17% average in the Chemicals industry. We would consider this a positive, as it suggests it is using capital more effectively than other similar companies. Setting aside the comparison to its industry for a moment, Bhansali Engineering Polymers’s ROCE in absolute terms currently looks quite high.

As we can see, Bhansali Engineering Polymers currently has an ROCE of 57% compared to its ROCE 3 years ago, which was 11%. This makes us wonder if the company is improving.

NSEI:BEPL Last Perf January 11th 19

Bhansali Engineering Polymers may not be the best stock to buy. So take a peek at this free list of interesting companies with strong recent earnings growth (and a P/E ratio below 20). ‘ data-reactid=”52″>Still, it has a high ROCE, and may be an interesting prospect for further research. But note: Bhansali Engineering Polymers may not be the best stock to buy. So take a peek at this free list of interesting companies with strong recent earnings growth (and a P/E ratio below 20).

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.

‘ data-reactid=”54″>To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.


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