Investors Will Want AXISCADES Technologies' (NSE:AXISCADES) Growth In ROCE To Persist

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. With that in mind, we've noticed some promising trends at AXISCADES Technologies (NSE:AXISCADES) so let's look a bit deeper.

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. The formula for this calculation on AXISCADES Technologies is:

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

0.13 = ₹1.0b ÷ (₹11b - ₹3.4b) (Based on the trailing twelve months to March 2024).

Thus, AXISCADES Technologies has an ROCE of 13%. That's a relatively normal return on capital, and it's around the 15% generated by the Construction industry.

View our latest analysis for AXISCADES Technologies

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

The Trend Of ROCE

AXISCADES Technologies has recently broken into profitability so their prior investments seem to be paying off. About five years ago the company was generating losses but things have turned around because it's now earning 13% on its capital. In addition to that, AXISCADES Technologies is employing 78% more capital than previously which is expected of a company that's trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

One more thing to note, AXISCADES Technologies has decreased current liabilities to 30% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance.

In Conclusion...

Overall, AXISCADES Technologies gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. And a remarkable 733% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if AXISCADES Technologies can keep these trends up, it could have a bright future ahead.

AXISCADES Technologies does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those can't be ignored...

While AXISCADES Technologies isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.

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