We Like These Underlying Return On Capital Trends At Thaai Casting (NSE:TCL)

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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Thaai Casting's (NSE:TCL) returns on capital, so let's have a look.

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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 Thaai Casting, this is the formula:

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

0.16 = ₹222m ÷ (₹2.1b - ₹703m) (Based on the trailing twelve months to March 2025).

So, Thaai Casting has an ROCE of 16%. On its own, that's a standard return, however it's much better than the 13% generated by the Auto Components industry.

See our latest analysis for Thaai Casting

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 Thaai Casting has performed in the past in other metrics, you can view this free graph of Thaai Casting's past earnings, revenue and cash flow.

How Are Returns Trending?

Investors would be pleased with what's happening at Thaai Casting. The data shows that returns on capital have increased substantially over the last four years to 16%. The amount of capital employed has increased too, by 831%. So we're very much inspired by what we're seeing at Thaai Casting thanks to its ability to profitably reinvest capital.

The Bottom Line On Thaai Casting's ROCE

In summary, it's great to see that Thaai Casting can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Given the stock has declined 39% in the last year, this could be a good investment if the valuation and other metrics are also appealing. So researching this company further and determining whether or not these trends will continue seems justified.

One final note, you should learn about the 4 warning signs we've spotted with Thaai Casting (including 2 which can't be ignored) .

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.