Nasdaq
华尔街日报The Returns At Shankar Lal Rampal Dye-Chem (NSE:SRD) Aren't Growing
If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, the ROCE of Shankar Lal Rampal Dye-Chem (NSE:SRD) looks decent, right now, so lets see what the trend of returns can tell us.
Understanding Return On Capital Employed (ROCE)
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 Shankar Lal Rampal Dye-Chem:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.16 = ₹177m ÷ (₹1.3b - ₹192m) (Based on the trailing twelve months to June 2025).
Therefore, Shankar Lal Rampal Dye-Chem has an ROCE of 16%. In absolute terms, that's a satisfactory return, but compared to the Trade Distributors industry average of 7.6% it's much better.
See our latest analysis for Shankar Lal Rampal Dye-Chem
Historical performance is a great place to start when researching a stock so above you can see the gauge for Shankar Lal Rampal Dye-Chem's ROCE against it's prior returns. If you'd like to look at how Shankar Lal Rampal Dye-Chem has performed in the past in other metrics, you can view this free graph of Shankar Lal Rampal Dye-Chem's past earnings, revenue and cash flow.
So How Is Shankar Lal Rampal Dye-Chem's ROCE 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 16% and the business has deployed 159% more capital into its operations. 16% is a pretty standard return, and it provides some comfort knowing that Shankar Lal Rampal Dye-Chem has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.
On a side note, Shankar Lal Rampal Dye-Chem has done well to reduce current liabilities to 15% of total assets over the last five years. This can eliminate some of the risks inherent in the operations because the business has less outstanding obligations to their suppliers and or short-term creditors than they did previously.
What We Can Learn From Shankar Lal Rampal Dye-Chem's ROCE
To sum it up, Shankar Lal Rampal Dye-Chem has simply been reinvesting capital steadily, at those decent rates of return. Yet over the last year the stock has declined 32%, so the decline might provide an opening. For that reason, savvy investors might want to look further into this company in case it's a prime investment.
If you'd like to know more about Shankar Lal Rampal Dye-Chem, we've spotted 2 warning signs, and 1 of them is significant.
If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.
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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.