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Godrej Agrovet (NSE:GODREJAGRO) Might Have The Makings Of A Multi-Bagger

Simply Wall St·04/29/2025 00:22:42
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If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, we've noticed some promising trends at Godrej Agrovet (NSE:GODREJAGRO) so let's look a bit deeper.

What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Godrej Agrovet:

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

0.19 = ₹6.1b ÷ (₹60b - ₹28b) (Based on the trailing twelve months to December 2024).

Thus, Godrej Agrovet has an ROCE of 19%. On its own, that's a standard return, however it's much better than the 13% generated by the Food industry.

View our latest analysis for Godrej Agrovet

roce
NSEI:GODREJAGRO Return on Capital Employed April 29th 2025

Above you can see how the current ROCE for Godrej Agrovet compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Godrej Agrovet for free.

What The Trend Of ROCE Can Tell Us

We like the trends that we're seeing from Godrej Agrovet. The data shows that returns on capital have increased substantially over the last five years to 19%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 34%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

Another thing to note, Godrej Agrovet has a high ratio of current liabilities to total assets of 46%. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

The Bottom Line On Godrej Agrovet's ROCE

All in all, it's terrific to see that Godrej Agrovet is reaping the rewards from prior investments and is growing its capital base. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

One more thing, we've spotted 2 warning signs facing Godrej Agrovet that you might find interesting.

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.