The Trend Of High Returns At Force Motors (NSE:FORCEMOT) Has Us Very Interested

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in Force Motors' (NSE:FORCEMOT) returns on capital, so let's have a look.

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Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Force Motors is:

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

0.28 = ₹9.6b ÷ (₹51b - ₹17b) (Based on the trailing twelve months to June 2025).

Thus, Force Motors has an ROCE of 28%. In absolute terms that's a great return and it's even better than the Machinery industry average of 15%.

View our latest analysis for Force Motors

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

The Trend Of ROCE

The fact that Force Motors is now generating some pre-tax profits from its prior investments is very encouraging. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 28% on its capital. Not only that, but the company is utilizing 56% more capital than before, but that's to be expected from a company trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

The Bottom Line

Long story short, we're delighted to see that Force Motors' reinvestment activities have paid off and the company is now profitable. And a remarkable 1,910% 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 Force Motors can keep these trends up, it could have a bright future ahead.

Force Motors does have some risks, we noticed 2 warning signs (and 1 which can't be ignored) we think you should know about.

High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.