Paramount Communications (NSE:PARACABLES) Might Have The Makings Of A Multi-Bagger

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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. So on that note, Paramount Communications (NSE:PARACABLES) looks quite promising in regards to its trends of return on capital.

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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. To calculate this metric for Paramount Communications, this is the formula:

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

0.095 = ₹724m ÷ (₹10b - ₹2.4b) (Based on the trailing twelve months to September 2025).

So, Paramount Communications has an ROCE of 9.5%. Ultimately, that's a low return and it under-performs the Electrical industry average of 17%.

Check out our latest analysis for Paramount Communications

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 Paramount Communications has performed in the past in other metrics, you can view this free graph of Paramount Communications' past earnings, revenue and cash flow.

What Does the ROCE Trend For Paramount Communications Tell Us?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The data shows that returns on capital have increased substantially over the last five years to 9.5%. Basically the business is earning more per dollar of capital invested and in addition to that, 104% more capital is being employed now too. So we're very much inspired by what we're seeing at Paramount Communications thanks to its ability to profitably reinvest capital.

The Bottom Line On Paramount Communications' ROCE

To sum it up, Paramount Communications has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 344% total return over the last five years tells us that investors are expecting more good things to come in the future. 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.

If you want to continue researching Paramount Communications, you might be interested to know about the 1 warning sign that our analysis has discovered.

While Paramount Communications 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.

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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.