Investors Shouldn't Overlook The Favourable Returns On Capital At GPT Infraprojects (NSE:GPTINFRA)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. That's why when we briefly looked at GPT Infraprojects' (NSE:GPTINFRA) ROCE trend, we were very happy with what we saw.

We've discovered 2 warning signs about GPT Infraprojects. View them for free.

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

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. Analysts use this formula to calculate it for GPT Infraprojects:

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

0.20 = ₹1.1b ÷ (₹8.8b - ₹3.2b) (Based on the trailing twelve months to December 2024).

Therefore, GPT Infraprojects has an ROCE of 20%. That's a fantastic return and not only that, it outpaces the average of 16% earned by companies in a similar industry.

View our latest analysis for GPT Infraprojects

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

So How Is GPT Infraprojects' ROCE Trending?

GPT Infraprojects deserves to be commended in regards to it's returns. The company has employed 105% more capital in the last five years, and the returns on that capital have remained stable at 20%. Returns like this are the envy of most businesses and given it has repeatedly reinvested at these rates, that's even better. If GPT Infraprojects can keep this up, we'd be very optimistic about its future.

One more thing to note, even though ROCE has remained relatively flat over the last five years, the reduction in current liabilities to 36% of total assets, is good to see from a business owner's perspective. This can eliminate some of the risks inherent in the operations because the business has less outstanding obligations to their suppliers and or short-term creditors than they did previously.

In Conclusion...

GPT Infraprojects has demonstrated its proficiency by generating high returns on increasing amounts of capital employed, which we're thrilled about. On top of that, the stock has rewarded shareholders with a remarkable 3,253% return to those who've held over the last five years. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

GPT Infraprojects does have some risks though, and we've spotted 2 warning signs for GPT Infraprojects that you might be interested in.

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.