Shareholders Would Enjoy A Repeat Of AXISCADES Technologies' (NSE:AXISCADES) Recent Growth In Returns

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. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of AXISCADES Technologies (NSE:AXISCADES) looks great, so lets see what the trend can tell us.

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

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. The formula for this calculation on AXISCADES Technologies is:

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

0.24 = ₹1.3b ÷ (₹9.0b - ₹3.6b) (Based on the trailing twelve months to June 2023).

Therefore, AXISCADES Technologies has an ROCE of 24%. In absolute terms that's a great return and it's even better than the Construction industry average of 12%.

Check out 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'd like to look at how AXISCADES Technologies has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

How Are Returns Trending?

We're delighted to see that AXISCADES Technologies is reaping rewards from its investments and has now broken into profitability. While the business was unprofitable in the past, it's now turned things around and is earning 24% on its capital. While returns have increased, the amount of capital employed by AXISCADES Technologies has remained flat over the period. That being said, while an increase in efficiency is no doubt appealing, it'd be helpful to know if the company does have any investment plans going forward. Because in the end, a business can only get so efficient.

The Key Takeaway

In summary, we're delighted to see that AXISCADES Technologies has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. Therefore, we think it would be worth your time to check if these trends are going to continue.

AXISCADES Technologies does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those is potentially serious...

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning 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.