Returns on Capital Paint A Bright Future For Mold-Tek Technologies (NSE:MOLDTECH)

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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 Mold-Tek Technologies (NSE:MOLDTECH) we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

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 Mold-Tek Technologies, this is the formula:

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

0.38 = ₹413m ÷ (₹1.3b - ₹197m) (Based on the trailing twelve months to June 2023).

So, Mold-Tek Technologies has an ROCE of 38%. In absolute terms that's a great return and it's even better than the Construction industry average of 13%.

View our latest analysis for Mold-Tek Technologies

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings, revenue and cash flow of Mold-Tek Technologies, check out these free graphs here.

So How Is Mold-Tek Technologies' ROCE Trending?

Mold-Tek Technologies is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 38%. Basically the business is earning more per dollar of capital invested and in addition to that, 158% more capital is being employed now too. So we're very much inspired by what we're seeing at Mold-Tek Technologies thanks to its ability to profitably reinvest capital.

The Key Takeaway

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 Mold-Tek Technologies has. And a remarkable 739% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

One more thing to note, we've identified 2 warning signs with Mold-Tek Technologies and understanding them should be part of your investment process.

Mold-Tek Technologies 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.