Returns At Sansera Engineering (NSE:SANSERA) Appear To Be Weighed Down

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. 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 Sansera Engineering (NSE:SANSERA) looks decent, right now, so lets see what the trend of returns can tell us.

Return On Capital Employed (ROCE): What Is It?

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. The formula for this calculation on Sansera Engineering is:

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

0.19 = ₹3.4b ÷ (₹28b - ₹9.8b) (Based on the trailing twelve months to June 2024).

Therefore, Sansera Engineering has an ROCE of 19%. On its own, that's a standard return, however it's much better than the 15% generated by the Auto Components industry.

Check out our latest analysis for Sansera Engineering

In the above chart we have measured Sansera Engineering's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Sansera Engineering .

What Does the ROCE Trend For Sansera Engineering Tell Us?

While the returns on capital are good, they haven't moved much. The company has consistently earned 19% for the last five years, and the capital employed within the business has risen 63% in that time. 19% is a pretty standard return, and it provides some comfort knowing that Sansera Engineering has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

What We Can Learn From Sansera Engineering's ROCE

To sum it up, Sansera Engineering has simply been reinvesting capital steadily, at those decent rates of return. And the stock has followed suit returning a meaningful 48% to shareholders over the last year. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

Like most companies, Sansera Engineering does come with some risks, and we've found 1 warning sign that you should be aware of.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.