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华尔街日报The Returns On Capital At Rajesh Exports (NSE:RAJESHEXPO) Don't Inspire Confidence
If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, 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. Although, when we looked at Rajesh Exports (NSE:RAJESHEXPO), it didn't seem to tick all of these boxes.
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. To calculate this metric for Rajesh Exports, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.013 = ₹2.2b ÷ (₹374b - ₹205b) (Based on the trailing twelve months to September 2025).
Therefore, Rajesh Exports has an ROCE of 1.3%. In absolute terms, that's a low return and it also under-performs the Luxury industry average of 11%.
View our latest analysis for Rajesh Exports
Historical performance is a great place to start when researching a stock so above you can see the gauge for Rajesh Exports' ROCE against it's prior returns. If you'd like to look at how Rajesh Exports has performed in the past in other metrics, you can view this free graph of Rajesh Exports' past earnings, revenue and cash flow.
So How Is Rajesh Exports' ROCE Trending?
In terms of Rajesh Exports' historical ROCE movements, the trend isn't fantastic. To be more specific, ROCE has fallen from 8.8% over the last five years. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.
On a side note, Rajesh Exports' current liabilities have increased over the last five years to 55% of total assets, effectively distorting the ROCE to some degree. If current liabilities hadn't increased as much as they did, the ROCE could actually be even lower. And with current liabilities at these levels, suppliers or short-term creditors are effectively funding a large part of the business, which can introduce some risks.
What We Can Learn From Rajesh Exports' ROCE
In summary, despite lower returns in the short term, we're encouraged to see that Rajesh Exports is reinvesting for growth and has higher sales as a result. These growth trends haven't led to growth returns though, since the stock has fallen 53% over the last five years. As a result, we'd recommend researching this stock further to uncover what other fundamentals of the business can show us.
Rajesh Exports does have some risks though, and we've spotted 1 warning sign for Rajesh Exports that you might be interested in.
While Rajesh Exports 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.