The Returns On Capital At Camlin Fine Sciences (NSE:CAMLINFINE) Don't Inspire Confidence
What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. However, after briefly looking over the numbers, we don't think Camlin Fine Sciences (NSE:CAMLINFINE) has the makings of a multi-bagger going forward, but let's have a look at why that may be.
What Is Return On Capital Employed (ROCE)?
For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Camlin Fine Sciences, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.086 = ₹1.0b ÷ (₹20b - ₹8.6b) (Based on the trailing twelve months to September 2025).
Therefore, Camlin Fine Sciences has an ROCE of 8.6%. In absolute terms, that's a low return and it also under-performs the Chemicals industry average of 12%.
View our latest analysis for Camlin Fine Sciences
Above you can see how the current ROCE for Camlin Fine Sciences 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 Camlin Fine Sciences for free.
How Are Returns Trending?
We weren't thrilled with the trend because Camlin Fine Sciences' ROCE has reduced by 44% over the last five years, while the business employed 48% more capital. That being said, Camlin Fine Sciences raised some capital prior to their latest results being released, so that could partly explain the increase in capital employed. The funds raised likely haven't been put to work yet so it's worth watching what happens in the future with Camlin Fine Sciences' earnings and if they change as a result from the capital raise.
Another thing to note, Camlin Fine Sciences has a high ratio of current liabilities to total assets of 42%. 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 Key Takeaway
To conclude, we've found that Camlin Fine Sciences is reinvesting in the business, but returns have been falling. And with the stock having returned a mere 27% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.
On a final note, we've found 1 warning sign for Camlin Fine Sciences that we think you should be aware of.
While Camlin Fine Sciences 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.