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

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding 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. So when we looked at AXISCADES Technologies (NSE:AXISCADES) and its trend of ROCE, we really liked what we saw.

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)

0.12 = ₹978m ÷ (₹11b - ₹3.4b) (Based on the trailing twelve months to June 2024).

Therefore, AXISCADES Technologies has an ROCE of 12%. That's a relatively normal return on capital, and it's around the 15% generated by the Construction industry.

See our latest analysis for AXISCADES Technologies

Historical performance is a great place to start when researching a stock so above you can see the gauge for AXISCADES Technologies' ROCE against it's prior returns. If you're interested in investigating AXISCADES Technologies' past further, check out this free graph covering AXISCADES Technologies' past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

The trends we've noticed at AXISCADES Technologies are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 12%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 78%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

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. This tells us that AXISCADES Technologies has grown its returns without a reliance on increasing their current liabilities, which we're very happy with.

The Bottom Line

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 AXISCADES Technologies has. And a remarkable 576% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

On a separate note, we've found 1 warning sign for AXISCADES Technologies you'll probably want to know about.

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.