Returns On Capital Are A Standout For ITD Cementation India (NSE:ITDCEM)

What trends should we look for it we want to identify stocks that can multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So when we looked at the ROCE trend of ITD Cementation India (NSE:ITDCEM) we really liked what we saw.

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

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for ITD Cementation India, this is the formula:

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

0.34 = ₹6.3b ÷ (₹61b - ₹43b) (Based on the trailing twelve months to December 2024).

So, ITD Cementation India has an ROCE of 34%. That's a fantastic return and not only that, it outpaces the average of 16% earned by companies in a similar industry.

See our latest analysis for ITD Cementation India

Above you can see how the current ROCE for ITD Cementation India compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for ITD Cementation India .

How Are Returns Trending?

The trends we've noticed at ITD Cementation India are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 34%. The amount of capital employed has increased too, by 63%. So we're very much inspired by what we're seeing at ITD Cementation India thanks to its ability to profitably reinvest capital.

Another thing to note, ITD Cementation India has a high ratio of current liabilities to total assets of 70%. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

The Key Takeaway

All in all, it's terrific to see that ITD Cementation India is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 1,185% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if ITD Cementation India can keep these trends up, it could have a bright future ahead.

On a final note, we've found 1 warning sign for ITD Cementation India that we think you should be aware of.

ITD Cementation India is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.