Stock Analysis

The Trend Of High Returns At MD Medical Group Investments (LON:MDMG) Has Us Very Interested

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LSE:MDMG
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If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, the ROCE of MD Medical Group Investments (LON:MDMG) looks great, so lets see what the trend 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. To calculate this metric for MD Medical Group Investments, this is the formula:

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

0.24 = ₽6.6b ÷ (₽34b - ₽6.4b) (Based on the trailing twelve months to December 2021).

Thus, MD Medical Group Investments has an ROCE of 24%. In absolute terms that's a great return and it's even better than the Healthcare industry average of 12%.

See our latest analysis for MD Medical Group Investments

roce
LSE:MDMG Return on Capital Employed July 20th 2022

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 MD Medical Group Investments has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What Can We Tell From MD Medical Group Investments' ROCE Trend?

Investors would be pleased with what's happening at MD Medical Group Investments. Over the last five years, returns on capital employed have risen substantially to 24%. The amount of capital employed has increased too, by 81%. So we're very much inspired by what we're seeing at MD Medical Group Investments thanks to its ability to profitably reinvest capital.

The Bottom Line On MD Medical Group Investments' ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what MD Medical Group Investments has. Astute investors may have an opportunity here because the stock has declined 34% in the last five years. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

MD Medical Group Investments does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those shouldn't be ignored...

High returns are a key ingredient to strong performance, so check out our free list ofstocks earning high returns on equity with solid balance sheets.

Valuation is complex, but we're helping make it simple.

Find out whether MD Medical Group Investments is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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